Premiums, payments and taxArticle 5 of 6 · 4 min read
Tax treatment of health insurance paid by your employer
Explains how Spanish income tax treats health insurance your employer pays for: a limited yearly tax-free amount per person, and tax on anything above it. Written for employees in Spain whose employer pays for private health cover.
Key rules
- Per-person cap: The exemption is counted separately for each insured person, and unused allowance cannot be moved between family members.
- Parents: Parents and other ascendants are not covered by the exemption.
- Policy type: Group and individual policies are taxed the same way.
- Ingreso a cuenta: Your employer normally pays the ingreso a cuenta itself, so it is not deducted from your cash pay.
The short answer
Health insurance your employer pays for you is treated as salary in kind (retribución en especie). Part of it is tax-free. The exempt amount is 500 euros per person a year for you, your spouse and your descendants, or 1,500 euros for a person with a disability. Anything above that is taxable work income in your IRPF.
Who is covered
The exemption covers premiums for:
- you, the employee
- your spouse
- your descendants, such as your children
Your parents and other ascendants are not covered. The cover must be health insurance, meaning medical care or health expenses.
The cap applies to each insured person separately. If your employer pays for you, your spouse and two children, each of the four has their own allowance. An unused allowance for one person cannot be moved to another.
Group or individual policy
It makes no difference. The exemption applies whether your employer takes out a group policy or pays for an individual one. The same per-person caps apply to both.
What happens to the excess
If the premium for one person is above the cap, the extra is taxed as part of your salary. For example, if the yearly premium for one family member is 700 euros, 200 euros of it is taxable.
In practice:
- Your payslip shows the excess in an in-kind section. It is added to the income your IRPF withholding is based on.
- Your employer must make an ingreso a cuenta. This is an advance tax payment on the value of the benefit. It is normally not taken out of your cash pay, and it appears on a separate line.
- After the year ends, your annual certificate of withholdings reports the in-kind amount and the ingreso a cuenta. Your employer also reports them to the tax agency.
Payslip layouts differ between employers, so the lines may be named or placed differently. Ask your payroll team if you cannot find them.
What to check
- Look at your payslip for the in-kind section and the separate ingreso a cuenta line.
- Ask your employer what premium is paid for each insured person, so you can see whether any of it passes the cap.
- Keep the annual certificate. You will need it when you file your tax return.
The documents and questions below cover the paperwork and common doubts in more detail.
Documents you need
-
Your monthly payslip from your employer, showing any in-kind section and the separate ingreso a cuenta line for premiums above the cap
-
Your annual certificate of withholdings from your employer, which reports the in-kind amount and the ingreso a cuenta for the year
Frequently asked questions
Does it matter if my employer uses a group policy or an individual policy?
No, a group policy and an individual policy paid by your employer get the same tax treatment. The same per-person caps apply to both, and the cover must be health insurance for you, your spouse or your descendants.
Are my parents covered by the employer-paid exemption?
No, the exemption does not cover your parents or other ascendants. It covers only you, your spouse and your descendants, so any premium your employer pays for a parent is taxed as pay in kind.
How does the taxable excess show up on my payslip?
The excess appears in the in-kind section of your payslip and is added to the amount used to work out your IRPF withholding. Your employer makes a separate advance payment called an ingreso a cuenta, which is normally not taken from your cash pay and is shown on its own line.
Where is the in-kind amount reported after the year ends?
The in-kind amount and the ingreso a cuenta are both reported in your annual certificate of withholdings from your employer. Your employer also reports them to the tax agency on its yearly withholdings return (Modelo 190). Use the certificate when you file your income tax return.
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