Expatriate Tax Advisory: The keys to applying economic compensation for remote workers in personal income tax
The Royal Decree-Law 28/2020 includes the novelties over the rights that employees have when they are remote working
On September 22nd, 2020 the Government made public the Royal Decree-Law 28/2020 on remote working. This regulation includes a series of measures to be considered when paying the economic compensation received for teleworking in the Personal Income Tax (PIT).
Firstly, the following aspects of the above-mentioned legislation should be highlighted:
- Article 11: it is established that the people who telework have the right to the enough provision and maintenance of the necessary tools and to the precise attention in case of technical difficulties.
- Article 12: acknowledges the right to have the teleworking compensated by the company, which may not imply the assumption by the worker of the expenses related to the tools linked to the development of his/her work activity.
However, the existing legislation lacks regulation on the tax consequences that may arise from such measures. In view of this, it is necessary to implement a new regulation that regulates the new labor remuneration and its tax treatment.
On the other hand, the income received by the remote worker may be of a monetary nature or in kind. Therefore, their treatment will depend on the form in which they are received and how they are interpreted in each legislation. More specifically, Article 42.1 of the Personal Income Tax Law (PIT) provides the following on payments in kind:
- The assignment of the use of equipment and tools that the company makes available to the worker for the development of his work at a distance is not considered income from work, provided that such use is exclusively labor-related.
- If the equipment or tool is likely to be used by the worker for particular purposes, the time corresponding to the particular use should be identified, since this particular use time should be included as additional income from work.
- Article 43.1 1º b) of the PIT establishes a specific valuation for the assignment of vehicles, while this type of payment in kind does not have a specific valuation rule, which would lead to the application of the market value in accordance with Article 43.1 of the PIT.
On the other hand, the treatment of the amounts delivered in cash by the company to the worker is simpler:
- The worker must use these amounts to acquire equipment and tools and to compensate for the costs of certain supplies in the private home (electricity, internet connection, water, etc.).
- The income is classified as monetary and must be declared by the worker as a return from work, after the paying company has made the corresponding deduction.
In conclusion, the company can cover the expenses of its remote workers in the following manner:
- Remuneration in kind: in cases where it is intended to eliminate the tax consequence of the assignment for the use of work tools, it would be advisable to install in the electronic equipment controls, locks and other applications that limit private use.
- Monetary retributions: they should be considered a monetary income from work that supports withholding tax. In addition, monetary amounts received to compensate for expenses incurred by the worker and originated by the work he or she performs should be exempted from taxation.
B Law & Tax
International Tax & Legal Advisors.
Etiquetas: Tax measures, Income tax, Expatriate tax advisor, Remote workers, Economic compensation, expatriate tax advisory