They are not commissions!

There are more and more companies that carry out promotional campaigns in which they offer financial rewards to clients (or even to third parties) for providing contacts that ultimately hire their services or purchase their products. How is this type of reward taxed in IRPF and VAT? Does the person receiving the reward become a commission agent and must charge VAT for their service? Must they declare it in IRPF as if it came from carrying out a professional activity and bear withholding from the payer?

Well, according to IRPF regulations, it is true that for someone to be considered a commission agent, it is sufficient for them to merely bring the interested parties together for the conclusion of a contract (which is what, a priori , seems to happen in these cases). However, be aware that the tax authorities consider that, for the commission agent to be regarded as such, in addition to presenting new clients to the company, it is necessary for them to actively participate in procuring the conclusion of the sales contract .

This would be the case, for example, of a real estate brokerage agency that, as part of its commercial policy, has established a reward system for individuals who provide contacts that end up resulting in actual sales. In this case, since the only thing the recipient of the reward does is present friends and family and it is the agency's own salespeople who are responsible for convincing them to buy the property, these rewards do not have the nature of commissions. For these purposes, it is irrelevant whether the reward is paid simply for presenting a potential client or whether that payment is conditioned on a purchase occurring: in neither of these cases is there a commission.

So how is it taxed?

However, there is an important warning: that these rewards do not have the nature of commissions does not mean that they are not subject to taxation. For their beneficiaries, they have the nature of capital gains, computable within the general base of IRPF.

On the other hand, these payments have the following tax treatment:

• The company should not withhold any amount on the rewards it pays (as would occur if the reward were received by a commission agent who carried out a professional activity).
• Furthermore, since they do not have the nature of professional income, the recipient of the rewards does not have to charge VAT on them .

Finally, please note that such bonuses are a deductible expense in the corporate tax of the paying company, as it is a expense directly related to the generation of income .

 

If your company is considering establishing a bonus system for individuals who bring in new clients, consult us. We will analyze the tax implications of this initiative.