• Navigation

Company cars and benefit in kind

If you have a company car you will pay some benefit in kind - BIK.  Tax rules are that you pay PAYE on a cash equivalent calculated using Original Market Value and the mileage you drive for business.

Original Market Value is calculated to be the list price of the car less 10% discount.  It bears no relationship to what you actually paid for the car, so for example if you buy a secondhand car, which you actually paid is ignored and Original Market Value is used to calculate benefit in kind.

Then you take a percentage of the OMV and add that to your monthly salary in accordance to the number of kilometres driven by you for work.

Kilometres for work per year                                          Percentage of OMV

0 - 24,000                                                                        30%

24,001 - 32,000                                                                24%

32,001 - 40,000                                                               18%

40,001 - 48,000                                                               12%

over 48,001                                                                      6%

Private mileage is assumed as 8,000 kilometres unless you have proof that it is lower.

So if you have a company car where the list price was €26,550, deduct 10% giving an Original Market Value of €23,895.  Say you don't do much mileage for the company, and drive less than 24,000 kilometres.  You are charged 30% of €23,895 which is €7,168.  Divide €7,168 by 12 months and add that to your salary to get the monthly equivalent, so in this example you will get taxed on €597 per month.

An employee can pay towards the cost of the car and get a reduction in the BIK and any cash paid reduces the BIK charged.  So in the above example if you paid your employer €200 per month towards the cost of the car you would get that take off the BIK and only pay tax on €397 per month.

The big change in this area is applying BIK to electric cars.  For electric cars under €50,000, employees won’t pay anything. However, there is another catch. The limit applies before the current €10,000 of grants (€5,000 SEAI grant and €5,000 in VRT rebate) are drawn down, so while a car may cost a buyer €35,000 for example, for the purposes of BIK it is regarded as a €45,00 car. Add more than €5,000 of options to the car and BIK starts to apply.