Estimating Salary In Kind Income

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.

Examples of different earnings that are salary in kind include housing, loans with an interest rate below the legal interest rate, cars, insurance contributions, and pension plan contributions.

The withholdings associated with the 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 a withholding is passed on, it will be discounted in the payroll for the employee as a tax deduction (deduction in kind) (IRPF SPCR). If a withholding is not passed on, the employer will pay the deduction to the tax institution. All the withholdings in kind must be shown in an element IRPF SPC (Ingresos a cuenta efectuados) or In kind withholdings made.

As a starting point in estimating salary in kind income, the system uses the value in the Annual Benefits Base Rate field on the Benefits Program participation page for estimation of in kind income because this benefits compensation is equal to in kind compensation. You can access this field through the Benefits Program Participation link on the Job Data component.

The system uses the same effective date data from the Job Data component when calculating the estimated in kind income.

Use the CLI VR EST FUTURO variable to indicate whether to include rows of data with future effective dates within the current year in the calculation. Set the character value of the variable to Y to include future data. If you set the variable to N, the system uses the as of date value to perform the estimation of the remaining part of the year. You can set the value for this variable at the element level by accessing it through the Variables component. Select Set up HCM, Product Related, Global Payroll. Elements, Supporting Elements, Variables. You can also set the character value of this variable through the supporting element overrides functionality.

Note:

The estimation method that PeopleSoft Global Payroll for Spain uses takes a total annual amount as the base of the estimation. The system does not perform an earning-by-earning calculation

If you enter in kind income through another means, the system might include that in kind income as part of that other category. For example, if you enter the in kind income through the Pay Components group box on the Compensation page of the Job Data component, the system manages the salary in kind as part of fixed income.