Spain: Retribution in Kind

In Spain, “retribution in kind” is a form of payment where the worker, instead of receiving cash as compensation for services rendered to the company, receives credit for services or goods.

This type of compensation constitutes real income for the employee and must be accurately reflected in their payslip. This implies that when calculating salary, it is essential to consider the regulations of the Personal Income Tax (IRPF).

It’s important to note that there is a limit to this type of compensation. Benefits in kind cannot exceed 30% of the total salary of the worker under any circumstances. Understanding this and other key concepts is essential for a correct interpretation of the payslip, making it easier to understand for all parties involved.

Since benefits in kind are considered work income, they must appear in the income tax return. It is worth mentioning that in-kind payment or salary is subject to Social Security contributions; therefore, it leads to the withholding of income tax.

It’s important to highlight that some benefits and services received by employees are not considered benefits in kind, which means they are not subject to taxes. This can represent significant tax savings in the income tax return, both for the worker and the company.

For the employer, benefits in kind are not only a tool to enhance their employer brand and retain talent but can also be advantageous in salary negotiations and, in certain cases, result in a deduction of Social Security contributions.

It’s crucial to include benefits in kind in the employment contract and reflect them on the payslip, as they are considered for income tax purposes.