Exchanging points for goods or services does not allow for the reduction for a generation period exceeding two years

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the tax nature of points programs offered to employees. The inquiry analyzes whether the granting of these points constitutes employment income in kind and whether it is possible to apply the reduction provided for income generated over a period exceeding two years.

What the DGT has ruled

The body establishes that the mere granting of points is not considered employment income. The taxable event occurs only at the moment when the goods or services resulting from the exchange of said points are delivered.

Regarding the application of the reduction from Article 18.2 of the LIRPF, the DGT points out that, to benefit from it, the income must have a generation period exceeding two years and be imputed to a single tax period. In the case of points programs, the enforceability of the income is deferred until the moment of exchange; therefore, the requirement of a generation period exceeding two years that would allow for such a reduction is not met.

What this means for you

This ruling has direct implications for both companies and their workers:

• For companies: They must consider the delivery of products through the exchange of points as income in kind and correctly assess its impact on employee remuneration.
• For employees: Those workers who decide to exchange their points for goods or services will be taxed for it as income in kind, but they will not be able to apply the reduction for a generation period exceeding two years, even if the period for the exchange is prolonged.

What should be done

It is necessary to analyze the structure of the company's incentive programs to ensure that the valuation of benefits in kind is correct. Since taxation occurs at the moment of exchange and not upon obtaining the points, the fiscal impact this will have on the worker's income tax return must be taken into account. It is recommended to assess each particular situation to determine the appropriate tax treatment for these benefits.