Telework, Flexible Compensation Plans and Personal Income Tax

The introduction of teleworking in the normality of the company is something evident, and therefore, it is a good time to review what type of issues could have a special impact for personal income tax purposes. 

As of today, there is no type of regulation adapted to teleworking for tax purposes, so we will have to continue adhering to the existing regulation, where remuneration in kind is defined as follows: 

“Income in kind is the use, consumption or obtaining, for private purposes, of goods, rights or services free of charge or at a price lower than the normal market price, even when they do not involve a real expense for whoever grants them.

When the payer of the income delivers to the taxpayer amounts in cash so that he may acquire the goods, rights or services, the income will be considered money."

Therefore, all monetary consideration as compensation for what is incurred by the worker, which has not been made on behalf of the company but on its own behalf, will be considered monetary income, subject to taxation without distinction from other remuneration concepts. 

As examples of these situations we could find, among others, the reimbursement of WIFI fees previously paid in the name and on behalf of the worker, payment of mobile lines, compensation for the acquisition by the employee of different types of equipment, etc. 

Likewise, flat-rate payments that serve to simplify and standardize the compensation of expenses to employees and that can be a good system for teleworking, will make their treatment for personal income tax purposes involve their direct consideration as a higher remuneration that is part of their taxable base (both individual and for withholding purposes), since the standard does not apply any type of special assessment to cases of monetary remuneration. 

It will be necessary to distinguish from the above, cases in which the worker's acquisition of elements in the name and on behalf of the employer that become part of his own assets (the worker may have managed, for example, the purchase of the computer for agility, but this is acquired in the name of the employer and becomes part of its assets), and we are faced with a mere supply, as this would not imply the emergence of any type of income or remuneration for the worker. 

Likewise, the delivery or transfer of equipment to employees who use them remotely due to work will not always determine their possible personal use; Issues such as the normal limitation of its use for exclusively work use, the filters and firewalls used for security reasons of the transferor company to protect the internal network from external attacks, etc.

May make use other than professional not possible and that, if so, it could be due to excesses made by the employee of an even illegal nature, so treating it as compensation would be out of the question.In any case, the extension of telework constitutes an exceptional occasion to review both the way in which the worker is provided with the necessary means of work for it, as well as the existing policies of flexible remuneration plans, this being another traditionally sensitive area.  

Remuneration in kind with special sensitivity: 

• Vehicles: the percentage used for their imputation, distinguishing between professional and private use, has suffered different comings and goings; The current trend of the inspection in this regard is the use of criteria of weighted availability of use that supposes percentages of personal use of the environment of 75-80% in commercials and close to 100% in managers. The review of the situation of the vehicles is vital for the management of the possible derived risks.
  

• Meal vouchers and transport services compensation: teleworking calls into question remuneration aimed at compensating this type of exempt remuneration when the workplace becomes the worker's own home.
  

• Provision of work items such as computers, telephone, printers, etc. for use from the worker's home: as we indicated above, the way in which these items are acquired, their assignment, or the reimbursement of the costs incurred for its acquisition will mark the treatment that must be given for tax purposes.
  

• Products at a reduced price: on many occasions, employees are recipients of offers related to products produced or marketed by their employer. The correct valuation of these for tax purposes to determine the existence or not of income in kind, is especially important.

For more information:

Guadalupe Díaz-Súnico
Partner Tax Department

Jesús Pérez Esquide
Partner Tax Department