Flexible pay and benefits in a Spanish offer (retribución flexible)

Key rules

• Meal benefit: Employer meal vouchers or restaurant cards are tax-exempt up to €11 a day.
• Transport pass: Public transport passes paid by your employer are exempt up to €1,500 a year for you, or €3,000 combined with family passes.
• Health insurance: Employer-paid health insurance is exempt up to €500 a year per insured person, or €1,500 for a person with a disability.
• Above the limit: Anything over an exempt limit is taxed as ordinary salary.
• Flexible pay: A swap of cash for benefits is voluntary, written, and cannot take your cash pay below the SMI.

Benefits only beat cash up to a limit

A benefit is worth more than its face value only while it stays inside its tax-free limit. Anything above the limit is taxed like normal salary, so it is worth no more than cash. When you compare offers, value each benefit at its face value up to the limit and at your after-tax value above it.

Meal vouchers and restaurant cards

Your employer's meal vouchers, restaurant cards or canteen subsidy are tax-exempt up to €11 a day. Three conditions apply to voucher or card payments:

• The meal must be on a working day.
• The amount must stay within the daily limit.
• You cannot receive another meal allowance for the same day.

If there is no canteen, voucher or card, this exemption is not available and the general daily allowance rules apply instead. Check the current daily figure before you rely on it, because it has been proposed for an increase before.

Transport passes

An employer-financed public transport pass is exempt from income tax up to €1,500 a year per employee. If your employer also pays for your family's passes, the combined cap is €3,000. The pass must be for public collective transport. It has to be delivered as a pass or an equivalent payment arrangement, not as cash. Anything above the limit is taxable.

Health insurance

Private health insurance paid by your employer is exempt up to €500 a year for each insured person. That covers you, your spouse and your children. For a person with a disability the limit is €1,500. Premiums above the limit count as taxable pay. The policy must cover you, and it may extend to your spouse and descendants.

Limits on flexible compensation

Flexible compensation (retribución flexible) means you give up part of your cash pay in exchange for benefits. It has legal limits:

• It is voluntary and set out in a written agreement between you and your employer.
• It cannot take your cash pay below the SMI, the minimum wage.
• It should not push your pay below what your collective agreement sets.
• Only benefits the tax rules list can be exempt: meals, transport, health insurance, childcare and training.
• Amounts above the exempt limits are taxed as pay.
• Social Security contributions are still due on a benefit unless it is also exempt from them.
• The swap usually applies from the date you sign, and the agreement normally covers a year. You can usually change it if your circumstances change.

Ask your employer for the written terms before you sign. The exact rules depend on the benefit and on your collective agreement, so ask HR which one applies to you.

The questions below cover family cover, overlapping meal allowances and swapping your whole salary.

Frequently asked questions

Does the transport pass exemption cover my family too?

Yes, the exemption can cover a pass for your family, but the combined cap is €3,000 a year. For you alone the limit is €1,500 a year. The pass must be for public collective transport and given as a pass or equivalent payment arrangement, not as cash.

How much employer-paid health insurance is tax-free for my family?

Employer-paid health insurance is tax-free up to €500 a year for each insured person, including you, your spouse and your children.

What if I get a meal benefit on a day I also get another meal allowance?

No, the meal exemption does not apply on a day when you also receive another meal allowance. The meal must also fall on a working day. Anything above the daily limit is taxed as normal pay.

Can I swap my whole cash salary for benefits?

No, a swap cannot reduce your cash pay below the minimum wage (SMI), or below your collective agreement. The swap is voluntary and written into an agreement, usually for a year.