Taxation of benefits from employment

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 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.

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 under the Cycle to Work Scheme
• 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.)
• 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 prohibited and the employee spends 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 Universal Social Charge to be collected from all benefits-in-kind are deducted by your employer at source.

Preferential home loans

A ‘preferential loan’ means a loan, made by your employer to you and/or your spouse or civil partner, 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:

The current rates are:

• Loan for home (principal residence): 5%
• Other loans: 12.5%

You can get more information on the tax treatment of preferential loans from employers from Revenue.

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.