Public transport commuter tickets and tax

Information

The TaxSaver Commuter Ticket Scheme was established in Ireland in 2000 as an incentive for workers in some parts of the country to use public transport. You can avail of public transport commuter tickets if you are travelling for work by public transport bus or rail. The scheme is not confined to State-owned forms of public transport and can include private operators if they are approved transport providers.

In June, 2004 the Scheme was extended to include LUAS services. Since January 2004 the Scheme has also applied where a pass/ticket covers more than one operator (for example, an integrated ticket covering LUAS and Dublin Bus services).

This incentive is seen as a positive way to encourage more people to avail of public transport in Ireland and to reduce traffic congestion. The employers and employees participating in the scheme sign a contract with each other agreeing to participate. The employer then applies, for example, to Iarnród Éireann and/or Dublin Bus for commuter tickets for employees who have chosen to take part.

The TaxSaver scheme is operated by Dublin Bus,Bus Éireann and Irish Rail and approved transport providers in conjunction with the Revenue Commissioners. The scheme involves employers providing employees (including company directors) with bus and rail commuter tickets while saving on employer PRSI payments. Employees participating in the scheme benefit from reduced income tax, PRSI and Universal Social Charge (USC) payments.

Employees receive tickets either as part of their salary package (salary sacrifice), in lieu of an annual cash bonus, or as a benefit-in-kind. Savings arise because tickets are not subject to tax, PRSI or USC. Employees only have to pay tax, PRSI and USC on the "money" portion of their salary. Employer PRSI is also calculated on the "money" portion of the employee's salary.

According to Dublin Bus and Irish Rail, employers can achieve PRSI savings of up to 10.75% and employees can save between 31% and 52% of travel costs as a result of tax, PRSI and USC savings by participating in the TaxSaver commuter scheme.

Rules

Eligibility

All employees (including company directors) of companies that choose to participate in the TaxSaver scheme are eligible to take part, as long as the commuter tickets are applied for and provided by the employer.

Contract between employer and employee

Employees who wish to take part in the TaxSaver scheme first select the ticket type best suited to their needs.

Employers and employees must then sign a contract setting out the terms under which they will participate in the scheme. To ensure the company is not acting without an employee's knowledge, the employee must agree to the terms of the contract and sign it.

All contracts between the employer and employee must be secured before the employer applies for TaxSaver tickets. It is important that both parties are clear from the start as to the conditions of the contract. For example, they need to clarify what should happen if an employee leaves the company before the ticket expiry date is up, whether a monthly or an annual ticket would be more suitable, etc.

A signed contract is binding for 12 months. If, for example, an employee goes on holiday during that time, he or she cannot give back the ticket, get a refund for the time spent away and reclaim the ticket upon returning.

If an employee returns a ticket to an employer before the 12 months is up, he or she cannot rejoin the scheme until the 12-month period has expired. However, the company can get a refund for the portion of the year not used by the employee.

Tickets are strictly non-transferable and cannot be exchanged for cash benefits.

Once a contract between employer and employee has been signed, the employer applies the tax conditions set out below and makes a group application to the transport provider on behalf of all employees contracted into the scheme. Individual applications from employees are not permitted.

Tax conditions

There must be a bona fide and enforceable alteration to the terms and conditions of employment (exercising a choice of benefit instead of salary). The alteration must not be retrospective and must be evidenced in writing.

There must be no entitlement to exchange the benefit for cash.

The choice exercised (i.e., benefit instead of cash) cannot be made more than once a year and then only with the consent of the employer.

Options for participation in the scheme

Employees may participate in the scheme in one of three ways.

Salary sacrifice

By participating in salary sacrifice, employees receive TaxSaver commuter tickets as part of their basic salary package.

To illustrate how this works, assume that the annual cost of a bus/rail ticket is €1,040 and that an employee is earning €20,000 per annum. Instead of the employee buying the ticket him or herself for €1,040, the employee agrees with the employer a salary sacrifice of €20 per week for the cost of the annual ticket. (This equates to €1,040 for the year in which the employer pays for the ticket.) The employee will not be charged to tax/PRSI/USC on the portion of salary sacrificed; therefore, tax, PRSI and USC are now calculated on the employee's salary minus the salary sacrificed (€18,860).

From the employer's point of view, an employer will, as a matter of course, claim an expense for salary paid to employees. Continuing the above scenario, without salary sacrifice, the employer will pay €20,000 in salary and claim an expense of €20,000 salary plus the employer PRSI paid thereon. (If you assume a 10.75% rate applies, then employer PRSI would be €2,150.) With salary sacrifice, however, the employer will pay and claim €18,960 euro salary plus employer PRSI paid thereon (which comes to €2,030.20 - this is where the employer saves) plus a deduction of €1,040 (the cost of the ticket). The cost of the ticket is now regarded as an allowable expense for the purposes of Section 118 (5A) of the Tax Consolidation Act 1997 as amended by Section 8 of the Finance Act 2005.

Cash Bonus

As an alternative to salary sacrifice, an employer may offer employees TaxSaver commuter tickets in lieu of an end-of-year cash bonus. As cash bonuses are chargeable to tax and commuter tickets are not, tickets provide better value to employees than a cash bonus.

Benefits-in-kind

A third way in which employers and employees can benefit from the scheme is for employers to offer employees TaxSaver commuter tickets as a benefit-in-kind (e.g., in lieu of a parking space at work, as an incentive for an employee to remain with the company, etc.).

Benefits of participation

Employers can realise PRSI savings of up to 10.75% by providing staff with TaxSaver commuter tickets.

Employees can save up to 52% of travel costs as a result of tax, PRSI agus USC savings.

There is no longer any need to queue on a daily basis for bus or rail tickets.

Prepaid tickets are cheaper than paying cash. As an example, the valuation on annual bus and rail or bus and DART tickets runs out after eight months, which effectively means that for the last four months, a ticket holder is travelling free. On Rail Point-to-Point tickets, a ticket holder is effectively travelling free for the last two months.

Rates

It costs employers and employees nothing to join the scheme itself.

TaxSaver ticket types and prices

Dublin Bus, Iarnród Éireann and Luas offer several different types of monthly and annual tickets. Employees should familiarise themselves with all the available options and select the type of ticket best suited to their travelling habits (bearing in mind that the ticket can be used outside office hours, for leisure purposes, etc). Although annual tickets are ultimately better value, monthly tickets might be more practical for companies with a high turnover of staff. Detailed information sheets on each type of ticket are also available for distribution to employees.

Monthly tickets are valid for one calendar month and may be purchased up to two weeks in advance of the first of the month. Annual tickets are valid for one year from the first day of any month and can be purchased anytime.

You can find more information and lists of the annual and monthly commuter tickets available on the following websites:

  • Dublin Bus - provides ticket prices for bus, bus and rail including Dart, and bus and Luas
  • Irish Rail - provides ticket prices for rail, rail and bus, and rail and Luas
  • Bus Éireann - provides ticket prices for buses to Dublin and Cork
  • Luas - provides ticket prices for Luas

Information on commuter tickets may also be available on the websites of approved private operators.

How to apply

Applying for the scheme

Employees select the TaxSaver commuter ticket best suited to their needs, bearing in mind that commuter tickets may be used outside office hours and for leisure purposes.

Employer and employees sign a contract, subject to the rules of the scheme.

The employer applies the required Tax Conditions.

The employer registers with the public transport provider.

The employer makes a group application on behalf of participating employees by post, e-mail or online.

Information on how to apply is available on the websites below.

Companies must keep a receipt of purchase and a copy of the ticket for their tax records.

Where to apply

Information on where to apply is available on the following websites:

Information on where to apply may also be available on the websites of approved private operators.

Page edited: 19 August 2014