Introduction
As a business owner, you may want to reward your hardworking employees for their efforts throughout the year. However, providing benefits or gifts can be costly and subject to tax implications. That's where the Small Benefit Exemption scheme comes in.
Qualifying Incentive
From 1st January 2022, employers can give their employees up to two small benefits tax-free each year, as long as the combined value of the two benefits does not exceed €1,000. These benefits must not be in cash and can only be used to purchase goods or services. If more than two benefits are given in a year, only the first two may qualify for tax-free status. Unused allowance amounts cannot be carried over.
It's important to note that a single benefit of up to €1,000 may be provided to an employee tax-free. If a single benefit exceeds €1,000 in value, the full value of that benefit is subject to tax.
The following are some frequently asked questions about the Small Benefit Exemption Scheme in Ireland. If you have any further questions, our experienced professionals can provide guidance on this and other tax-related matters to help you navigate complex tax laws and regulations. Contact us today to schedule an appointment.
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Frequently Asked Questions
What is the Small Benefit Exemption Scheme in Ireland?
The Small Benefit Exemption Scheme is a tax-free benefit that employers can provide to their employees in Ireland. From 1 January 2022, employers can give employees up to two small benefits, tax-free, each year. These benefits must not be in cash and the combined value of the two benefits cannot exceed €1,000.
What kind of benefits can be provided under the Small Benefit Exemption Scheme?
Tax-free vouchers or benefits can be used only to purchase goods or services. They cannot be redeemed for cash.
How much can an employee receive tax-free under the Small Benefit Exemption Scheme?
A single benefit of up to €1,000 may be provided to an employee tax-free. If a single benefit exceeds €1,000 in value, the full value of that benefit is subject to tax. Where two benefits are provided, the combined value of those benefits cannot exceed €1,000.
What happens if an employee receives more than two benefits in a year?
If more than two benefits are given in a year, only the first two may qualify for tax-free status. Unused allowance amounts cannot be carried over.
Can an employer give an employee a cash bonus instead of a tax-free benefit?
No, the Small Benefit Exemption Scheme only applies to non-cash benefits. If an employer provides a cash bonus, it will be subject to PAYE, PRSI and USC.
Are there any exceptions to the Small Benefit Exemption Scheme?
Yes, there are some exceptions to the scheme. For example, if an employee receives a benefit as part of a salary sacrifice arrangement, the benefit will not qualify for the Small Benefit Exemption Scheme
Is it permissible for directors to receive benefits under the scheme?
Directors are eligible to receive benefits under the scheme, as long as they are employees of the company and meet the necessary criteria outlined in the guidance.
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