Taxation of benefits from employment

Information

In Ireland, most benefits from employment that are provided in addition to your salary are subject to income tax. The following is a summary of the main benefits that an employee may get and the rules the Revenue Commissioners apply. (The Revenue Commissioners are responsible for the collection of taxes on behalf of the Government).

Generally, there are two types of benefits that an employee may get in addition to a salary:

• Benefits-in-kind. These are benefits that an employee receives that cannot be converted into cash but have a cash value. Examples include provision of a company car, loans given at a special rate or provision of accommodation.
• Benefits (other than benefits-in-kind). Examples include vouchers, holidays, payment of an employee's bills and prizes.

Parking levy

Budget 2009 provides for a parking levy in urban areas. The parking levy will be paid by employees if they have use of car parking facilities provided either directly or indirectly by their employer. It is not taxed like other benefits and benefits-in-kind. The parking levy is a set amount, however, the amount you pay can vary.

The parking levy is €200 if you have the ongoing use of a parking space. The parking levy is €100 if you must share parking spaces and there are at least twice as many employees to parking spaces. The levy can also be reduced to take account of job-sharing arrangements, maternity leave (including 10 weeks before you start your maternity leave), adoptive leave and certain shift work (for example, if you start or finish work after 9 pm or before 7 am).

You do not pay the parking levy if you: 

• Are disabled driver with a Disabled Drivers Parking Permit or
• Have permission to park for not more than 10 days in a year

More information can be found in Revenue's guidance notes on the parking levy (pdf).

Rules

All employees who earn more than €1,905 per year pay tax on the value of any benefits and benefits-in-kind.

Taxation of benefits (other than benefits-in-kind), is made literally on the value of the benefit. For example, an employer provides you with a holiday voucher worth €2,000. This is treated as €2,000 income for tax purposes and is taxed accordingly.

The rules applying to benefits-in-kind vary. Generally, the value of the benefit-in-kind is the cost to the employer of providing the benefit less any contribution by the employee.  Special rules apply to the following benefits-in-kind:

• A car
• Other motor vehicles
• Loans
• Provision of living accommodation.

An employee can reduce the amount of benefit-in-kind assessed on a car they incur a certain amount of mileage for business purposes. The benefit-in-kind can be further reduced if an employee contributes to insurance costs, motor tax and petrol. Details on these rules regarding benefit-in-kind and cars are contained in the Revenue leaflet IT20a PAYE/PRSI on Benefits from Employment (pdf).

Benefits that are exempt from tax or can be received tax efficiently

There are some benefits that an employee can receive that are not subject to tax or can be received tax efficiently. These include:

• Provision of bus/train passes for one month or more
• Bicycle and safety equipment, the first €1,000 spent is exempt. You can get the exemption once every 5 years.     
• Free or subsidised childcare
• Certain share and approved profit sharing schemes
• Canteen facilities
• Reimbursement of expenses necessarily incurred in the course of employment
• Some accommodation provision
• Lump sum and certain redundancy payments
• Working clothes
• Non-cash personal gifts not related to employment
• Employer's contribution to statutory or revenue approved pension schemes.
• Mobile telephones, computer equipment and home high-speed internet connections where those benefits are provided for business use. (Private use is incidental).
• Subscriptions to professional bodies where membership is relevant to the business of the employer
• Private use of company van which is essentially for the purposes of employee's work and where there is an employer requirement to bring the van home and where other private use is prohibitied and the employee speds most of their working time away from the workplace to which they are attached.

This is not an exhaustive list and conditions and/or restrictions often apply to exemptions and should therefore be checked with the Revenue Commissioners.

Collection of tax from employment benefits

The tax, PRSI and the Health Levy to be collected from all benefits-in-kind are deducted by your employer at source. The Parking Levy will also be deducted by your employer.

Preferential home loans

A ‘preferential loan’ means a loan, made by your employer to you and/or your spouse, in respect of which no interest is payable, or interest is payable at a rate lower than the ‘specified rate’. An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the 'specified' rates of interest for the loans. The specified rates are as follows:

From 1 January 2010:

• Loan for home (principal residence): 5.5% 
• Other loans: 15%

For more information on the benefit-in-kind of preferential loans from employers see leaflet IT20a PAYE/PRSI on Benefits from Employment (pdf).

Small benefits

If your employer provides you with a benefit with a value not exceeding €250, PAYE and PRSI will not be applied to that benefit. No more than one such benefit received by you within a tax year will qualify for such treatment. Where a benefit exceeds €250 in value, the full value of the benefit will be subject to PAYE and PRSI deductions.

Where to apply