The amounts of flexible compensation intended for exempt products (food, transport, childcare, health insurance, training) no income tax tax return, because the company deducts them from the gross salary before calculating the IRFP (Personal Income Tax) on the monthly payslip. In the draft tax return, these amounts already appear excluded from the box for Employment Income, so the employee You don't have to make any manual adjustments..
The actual tax saving depends on the amount allocated to the plan and each employee's marginal income tax rate. In this article, we explain which items are exempt, how they appear on the tax return, the legal framework that regulates flexible remuneration, and how much can be saved with specific examples.
The Income Tax It is a direct tribute that taxes the income earned by individuals in a tax year within the territory where they reside. This tax is mandatory for most citizens and aims to finance essential public services such as education, healthcare, infrastructure, and social security, making it a key element in sustaining the welfare state.
The progressivity of income tax means that individuals with higher incomes contribute a higher percentage, ensuring a more equitable distribution of the tax burden. Furthermore, certain concepts may be exempt to reduce the IRPF tax base: the Benefits in kind exempt – such as those channelled through flexible remuneration (regulated by Article 42 of Law 35/2006 of the IRPF) –, contributions to pension schemes, or certain investment deductions.
The tax return is an annual procedure by which Taxpayers inform the Tax Agency about their income, deductible expenses, and other tax circumstances that occurred during the fiscal year.
This process allows for the calculation of whether the withholdings made throughout the year match the actual amount of personal income tax that needs to be paid, determining if the taxpayer owes an additional amount or if, conversely, they are entitled to a refund. The declaration is not only a legal requirement but also a tool for to adjust the tax burden according to the personal and economic circumstances of each citizen.
One of the key aspects of flexible remuneration is understanding how does it affect IRPF and how are these earnings reflected in the annual tax return.
It is important to note that amounts for exempted services, such as restaurant ticket, Transport ticket, Nursery vouchers or Health insurance are not considered part of the gross salary subject to taxation, provided that the limits established by law are respected.
In practical terms, No further action is required on the Tax Return, as the Income from Employment box automatically excludes non-taxable benefits that have been applied monthly on the payslip as part of Flexible Remuneration.
Therefore, it is fundamental that companies correctly apply exemptions when calculating their employees' payroll. Otherwise, there may be inconsistencies when submitting the Tax return.
Flexible remuneration does not appear as a separate concept in the draft declaration: amounts intended for exempt products have already been deducted from the gross salary before calculating the income tax withholdings on the payslip, and therefore do not appear in the box for Employment Income from the draft.
This means that the employee will see an amount for employment income on their draft. inferior to your gross salary agreed in the contract. The difference corresponds precisely to the amounts allocated to flexible remuneration during the fiscal year.
To check that the company has correctly applied exemptions, the employee can:
If, upon reviewing the draft, the employee notices that the flexible remuneration has not been deducted, the first step is Contact the company's HR or payroll department so that they can verify the withholding certificate that they have communicated to the Tax Agency. If the company confirms that the amounts are correct on their certificate but they are not reflected in the draft, the employee can manually modify the figures in their tax return before submitting it, providing the certificate documentation as support in case of review.
In practice, these types of incidents are rare when the plan is managed through a specialised platform such as Edenred Flex, as the documentation for exemptions is centralised and automatically communicated to the AEAT via the company's annual certificate.
The law Law 35/2006 of 28 November y ehe Royal Decree 439/2007, of 30 March 2007 they regulate flexible remuneration and establish the conditions and limits for these tax benefits to be applicable. Among the most relevant requirements are:
The savings depend on the amount allocated to the plan and the employee's marginal income tax rate. Let's look at an example:
María dedicates €1,980 per year to Ticket Restaurant (180€/month for 11 months, within the limit of 11€/working day). With a marginal rate of 30% (salary between €20,200 and €35,200), the mechanics are:
| Without flexible remuneration | With flexible remuneration | |
| 20 meals per month x 11 months | £1,980.00 | £1,980.00 |
| Income tax applicable on that amount | €594.00 (30%) | ✅ EXEMPT |
| Salary available | 1,386.00€ | ✅ £1,980.00 |
| INCREASE IN DISPOSABLE WAGES PER ANNUM | ✅ 594.00€ |
If Maria were to also allocate, 1,500 € per year on public transport and £500 for health insurance (both within the exemption limits), your total annual saving would be approximately €1,194 (30% at around €3,980).
Note: this calculation is an estimate. The actual savings depend on the employee’s tax bracket (between 19% and 47%, depending on income), their family circumstances and the autonomous community in which they reside. For a personalised estimate, please consult the Flexible remuneration savings calculator.
Flexible remuneration is one of the most efficient ways to reduce personal income tax and increase your team’s disposable income, without increasing the company's wage costs. The key is to design a plan that suits the actual needs of the workforce and to manage the documentation well so that exemptions are applied correctly in each declaration.
Would you like to know how much you could save? Estimate the return for your company with the ROI calculator for businesses or individual savings with the Employee savings simulator. If you want to delve deeper into how to implement a step-by-step plan, download our e-book on flexible remuneration.
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