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:
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:
An employee can reduce the amount of benefit-in-kind assessed on a car if 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.
There are some benefits that an employee can receive that are not subject to tax or can be received tax efficiently. These include:
This is not an exhaustive list and conditions and/or restrictions often apply to exemptions and should therefore be checked with the Revenue Commissioners.
The tax, PRSI and Universal Social Charge to be collected from all benefits-in-kind are deducted by your employer at source.
A ‘preferential loan’ means a loan, made by your employer to you and/or your spouse or civil partner, on 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:
The current rates are:
You can get more information on the tax treatment of preferential loans from employers from Revenue.
You can receive a small non-cash benefit from your employer without paying PAYE, USC and PRSI. Such a benefit must have a value of €500 or under (€250 up to 21 October 2015). This treatment does not apply to cash payments, which are taxable in full. You can only avail of this relief once in a tax year. If the benefit is more than €500 in value (€250 up to 21 October 2015) the full value of the benefit is subject to PAYE, USC and PRSI.
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.