Dáil Éireann Debate, Monday - 9 September 2024
322. Deputy Fergus O'Dowd asked the Minister for Finance to review the concerns raised in correspondence (details supplied) relating to depreciation as a factor in BIK calculations; and if he will make a statement on the matter. [34206/24]
Amharc ar fhreagraAs the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. However some general background information is provided below.
Section 121 of the Taxes Consolidation Act (“TCA ”) 1997 provides that where a car is made available for the private use of an employee then the employee is chargeable to benefit in kind tax (“BIK”). Where such a benefit is provided to an employee by his or her employer, the employer is required to include that notional payment as part of the employee’s emoluments and to deduct tax via the PAYE system accordingly.
At present, the amount taxable as a BIK is determined with reference to the cars original market value (“OMV”), the annual business kilometres driven, and the CO2 emissions of the vehicle in question.
Electric cars that fall into ‘Category A’ vehicles, i.e., vehicles with CO2 emissions between 0g/km and 59g/km inclusive, benefit from a preferential rate of BIK, ranging from 9% – 22.5% depending on business mileage.
In addition electric cars, are further incentivised under section 121(4A)(aa) TCA 1997. This provides that the cash equivalent of an electric vehicle made available for an employee’s private use during the years 2024 to 2027, is calculated based on the OMV of the vehicle reduced by:
• €35,000 in respect of vehicles made available in the 2024 and 2025 years of assessment,
• €20,000 in respect of vehicles made available in the 2026 year of assessment, and
• €10,000 in respect of vehicles made available in the 2027 year of assessment.
This tapering relief is in addition to a €10,000 temporary reduction to OMV that applies to all employer provided cars, with CO2 emissions of 179g/km or less, for the 2023 and 2024 years of assessment. Therefore, the total reduction in OMV for an electric vehicle for 2024 is €45,000 (i.e., €35,000 plus the €10,000 temporary reduction that applies for 2024), on the basis that the CO2 emissions do not exceed 179g/km.
The reductions above apply irrespective of the actual OMV of the vehicle or when the vehicle was first provided to the employee. If the reduction reduces the OMV to nil, a BIK charge will not arise. Any portion of OMV remaining, after the reduction is applied, is chargeable to BIK at the prescribed rates.
Further information in regard to the tax treatment applicable where an employer makes a vehicle available to an employee for his or her private use can be found at the links below:
• Revenue website: www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/index.aspx
• Tax and Duty Manual Part 05-01-01b: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf
