Spain: Health Insurance

In the last publication, we talked about stock options. This time, we will focus on medical insurance as a payment in kind and its impact on payroll:

 

Health insurance

Medical insurance is an option within the remuneration in kind offered by the company with the aim of improving the public provision of health care through the arrangement of private insurance.

For tax purposes, the fees paid by the company to insurance companies for the coverage of illnesses are not considered as income in kind subject to taxation as long as the following requirements are met:

1. The purpose of the coverage must be health care in the event of illness.
2. The beneficiary must be the employee, with the possibility of including his spouse and/or descendants.
3. The exempt limit is 500 euros per year for each of the beneficiaries. The excess of this would represent a remuneration in kind subject to taxation. If one of the beneficiaries accredits a disability, the exempt limit would amount to 1500 euros.

 

Some clarifications about the limits for the application of the tax exemption of the concept would be the following:

• The condition of the policyholder must necessarily correspond to that of the company.
• The reference to the spouse does not cover the unmarried partner of the employee.
• There is no limit based on the age of the descendants or the volume of income.
• Based on the generality of the precept, the employee’s children, grandchildren, and great-grandchildren must be understood to be included as descendants.
• If the company were to give the employee the amount of the cost of the medical insurance contracted directly, the exemption would not be applicable since it would not be a payment in kind but a monetary payment.

In terms of Social Security, the concept will be paid in full for both the employee and the employer.

In conclusion, it should be noted that the fact that the employer offers this type of remuneration in kind can favour the attraction of talent, improve the working environment, and the productivity of the employees by offering beneficial compensation for them, which can have an impact on the results of the company in the short and long term.