Small Benefit Exemption What is the small benefit exemption?

Last updated: Nov 27, 2023

As a result of changes announced in the Budget on 27 September 2022, company directors and employees can now receive up to €1,000 in non-cash benefits completely tax free each year from their employer. Directors and employees can be rewarded for their hard work without the imposition of taxes on up to €1,000. The most common way to provide the benefit is in the form of gift vouchers, such as one4all vouchers. It is common to provide this reward to staff in the run up to Christmas.

Small Benefit Exemption
Small Benefit Exemption

What are the small benefit exemption conditions?

It is important to understand and follow the conditions, otherwise the full benefit may be taxable.

  • The benefits cannot exceed €1,000 in value
  • Only two vouchers or benefits may be given in any one tax 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.
  • The aggregate benefit can only be used to purchase goods or services and cannot be exchanged in part or in full for cash. For example, a prepaid card that allows cash to be withdrawn from an ATM would not be allowable.
  • The aggregate benefit cannot be part of any salary sacrifice arrangement between the employee and employer
  • The employer must buy the voucher - an employee can’t purchase it and be reimbursed.

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. If you paid out a €500 tax free voucher already in 2022, a second €500 voucher can be rewarded before the end of 2022 to avail of the full €1,000 entitlement.

What is the saving from the Small Benefit Exemption?

No income tax, PRSI (employer or employee) or USC is imposed on the small benefit. This can result in an overall tax saving of up to €1,313 for employees, or €1,083 for proprietary directors, depending on the individual's rate of tax.

Does the Small Benefit Exemption need to be declared?

The exemption is open to every employer and the company does not need to apply to avail of this exemption. The company should keep a record of the voucher purchases in their bookkeeping system and note who the benefit was for. Currently, there is no need to report the exemption payment to the Revenue Commissioners. This results in the exemption being quite simple for employers to operate.

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