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V1262-20 5 May 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · retribución en especie

Employer-paid health insurance premiums may be exempt from Personal Income Tax under certain conditions

A worker inquired whether employer contributions towards health insurance premiums constitute benefits in kind or a mediation of payment. The Directorate General for Taxes (DGT) ruled that the portion paid by the employer is an exempt benefit in kind, whereas the portion deducted from the employee's salary is a mediation of payment of monetary income.

The question raised

Application of Article 42.3.c) of Law 35/2006.

The DGT's ruling

For the exemption of health insurance premiums to be effective, the company must be the policyholder. The portion of the premium assumed by the company as agreed in-kind remuneration is exempt within the limits of 500 euros per person annually (or 1,500 if there is a disability). The portion paid by the employee through payroll deduction is considered a payment mediation of monetary income, not in-kind remuneration.

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