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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, what 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.

There are further examptions for employees with low mileage i.e. below 24,000 kilometres.

If the employee does not travel more than 24,000 kilometres annually, the cash equivalent calculated may be further reduced by 20%.

To get this reduction the employee must also:

  • work an average of at least 20 hours per week
  • travel at least 8,000 business kilometres annually
  • spend at least 70% of their working time away from the workplace
  • retain a log book with details of business kilometres and work purposes.

There are also variations when it comes to calculating the BIK during Covid.  The car can be treated as if it was not available to the employee in that time as if they were abroad for work.

Where this happens, you can reduce the cash equivalent to reflect the number of days the employee actually had the car for use i.e. there were no lockdowns and the employee was allowed to go about their daily duties - visiting customers, building sites and so on.

Where this happens, you can ‘annualise’ the business kilometres to calculate the cash equivalent of the car. This allows you to see what the cash equivalent would have been if the employee used the car for the full year.

You can then reduce the cash equivalent by the number of days the car was not in use  that year.

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.