Tax benefits of health insurance for companies and workers in Spain.
Taking out group health insurance (for companies) or offering the possibility of taking it out to employees has as many benefits for the company itself as for its employees. And both benefit from advantages in their tax returns. In the case of the employee, they can save on their taxes or deduct the amount paid in their tax return. It all depends on who pays for the insurance. But in many cases it is possible to deduct health insurance from your income tax.
The employee can decide whether he or she wants to take out health insurance and register for it. If he/she does so, he/she will receive part of his/her salary in kind. In other words, he/she will receive part in cash and part in services, such as health insurance.
Advantages for the company: The company can deduct 100% of the capital used to pay for group health insurance for its employees, as it is taxed for corporate income tax purposes.
Advantages for both parts:
Advantages for the employee: If the employee receives the health insurance policy as part of his/her salary, it is not considered as income from work, so that he/she, his/her spouse and his/her children under 25 years of age who live in the family home and do not have an income higher than the agreed amount are exempt from taxation, which translates into savings. In this case, the limit is also set at 500 euros for each of the persons indicated: if the premium exceeds this amount, the first 500 euros are not taxed but the rest is taxed, specifically as income in kind.
For the employer and the rest of the family.
This is a benefit both for the employee and for all persons included in his or her policy (spouse and children under 25). As in the case of the self-employed, they can deduct the amount of the premium paid with a limit of up to 500 euros per person.
Companies are subject to Corporate Tax according to the profits they make. In this way, the amount of these medical policies is included in the profit account, resulting in a significant tax reduction.
Example to understand the advantages for the employee:
An employee who earns 18,000 euros per year but who receives 450 euros in the form of medical insurance payments, in the income tax return, the income from work will only be 17,550. This figure is the one that the Tax Agency will take into account when applying taxes, hence the discount and the tax benefit.
Thank you for reading this post, if you think we have been able to help you or if you still have any questions, you can always contact me via WhattsApp (+49 1520 8381499) or e-mail (erica@taxandlawspain.com).
