Flexible compensation and covered medical expenses

If your company covers the cost of certain services for its employees, they can declare such in-kind compensation as exempt . For example:

• Payments to collective transport entities for commuting (train, subway, bus…), up to 1,500 euros annually.

• Payment of the employee's health insurance, their spouse, and their descendants, up to 500 euros per person per year (1,500 euros in the case of persons with disabilities).

• Payment for childcare services for employees' children.

• Canteen service or the provision of meal vouchers or restaurant cards (in the latter case, with a limit of 11 euros per day).

Well, although it is not widely known, your employees also do not have to pay taxes on the financial aid that your company provides to help them cover expenses aimed at the treatment or recovery of their health or that of their family . According to the tax authorities, such income is not subject to income tax , since, upon receiving it, the employee's economic capacity is not increased.

However, for such financial aid not to be taxed, an additional essential requirement must be met: the aid must be provided to cover expenses not covered by Social Security or the corresponding mutual insurance .

This would be the case, for example, of the following medical services:

• The purchase of glasses or lenses for prescription glasses, contact lenses, and frames.
• Dental treatments, such as complete and partial dentures, fillings, orthodontics, endodontics, or crowns.
• Ophthalmology, orthopedics, dentistry, physiotherapy, psychiatry, speech therapy, or special education treatments not covered.

If your company offers a flexible compensation plan for its employees, consider including this type of services as well. In addition to health insurance, restaurant cards, or childcare vouchers, within this plan, your company can also offer its workers the possibility of allocating part of their salary to change their corrective glasses or buy hearing aids to hear better –for example– and not have to pay taxes on those amounts in the IRPF.

 

If you want to establish a flexible compensation plan within your company or improve the one you already have, consult us. We will advise you on how to act to avoid problems with the tax authorities and optimize the IRPF taxation of your employees.