SMALL BENEFIT EXEMPTION Understanding the Small Benefit Exemption in Ireland

Last updated: Jan 19, 2024

As a result of changes announced in the Budget on 27 September 2022, company Directors and Employees now have the opportunity to receive up to €1,000 in non-cash benefits annually, completely Tax-Free, from their Employers. This update allows for a tangible reward for their dedication and hard work, without the burden of additional taxes on these benefits. Gift vouchers, particularly popular ones like One4all vouchers, are the most common form of these benefits. These rewards are often given to staff as a token of appreciation, especially during the festive season, leading up to Christmas.

Small white gift box with a red bow on a wooden table, symbolising the Small Benefit Exemption in Ireland.
Small Benefit Exemption in Ireland

What are the Small Benefit Exemption conditions?

Understanding and adhering to the conditions of the Small Benefit Exemption in Ireland is crucial, as failing to do so could render the entire benefit taxable. Key points include:

  • The benefits cannot exceed €1,000 in value.
  • A maximum of two vouchers or benefits are allowed per tax year. Should more than two be given, only the initial two are eligible for Tax-Free status. Unused allowances are not transferable to subsequent years.
  • 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, prepaid cards enabling cash withdrawals are not permissible.
  • 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. For instance, 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. The date paid and the value of this benefit must be submitted under Enhanced Reporting Requirements.

What are the savings from the Small Benefit Exemption?

This exemption offers significant tax savings. No Income Tax, PRSI (both Employer and Employee), or USC applies to the Small Benefit. Employees can save up to €1,313, while proprietary Directors can save up to €1,083, depending on their tax rates.

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. From 1 January 2024, under Enhanced Reporting Requirements the benefit must be reported to the Revenue Commission on or before payment.

If you choose Incorpro and our Accounting and Bookkeeping service, we will report the exemption as part of the payroll processing for your company.

Further Guidance and Assistance

Should you have any queries or require assistance with your Accounting and Tax needs, our dedicated team at Incorpro is here to help. Connect with us by calling 01-4429409, or visit our Contact Page for more ways to get in touch. Stay updated and engaged by following our Social Media Pages on Twitter, Facebook, LinkedIn and Instagram.

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