Salary In Kind

Salary in kind are goods or services provided for the employee at a rate lower than the market price. PeopleSoft Global Payroll for Spain delivers a low interest loan benefit and life insurance as not passed on, and company car as passed on.

Although salary in kind is fully taxable, it may contribute fully or only partially to the Social Security base depending on its source. When a company provides salary in kind as part of normal labor agreement or contract agreement, the salary in kind contributes fully to the Social Security base. If, however, the company provides salary in kind voluntarily then a certain amount of it is exempt from contributing to the Social Security base.

To determine whether voluntary salary in kind is exempt, compare the sum of all the earnings considered as salary in kind to 20 percent of the IPREM (Indicador Público de Renta de Efectos Múltiples), which is a statutory rate published by the government each year. If the sum of all a payee's earnings does not exceed 20 percent of the professional minimum salary, not all of the salary in kind contributes to the Social Security bases. Any earnings in excess of 20 percent of the IPREM contribute fully to the Social Security base. When a payee receives more than one earning that is considered salary in kind, you must calculate the individual excess for each earning in proportion to its value.

The different types of salary in kind earnings include housing loans with an interest rate below the legal interest rate, cars, insurance contributions, and contributions to pension plans, for example.

The withholdings for salary in kind can be paid by the employer (withholdings in kind not passed on) or by the employee (withholdings in kind passed on). If it is passed on, the withholding is discounted in the payroll for the employee as a tax deduction (deduction in kind). If it is not passed on, the employer will pay the deduction to the tax institution.