Christmas vouchers – tax free
If you are looking to give an ROI employee a reward at Christmas then why not avail of the Government’s small benefit scheme and save the employee and you the employer payroll taxes. For employees on Irish payroll this is tax efficient for the company and also for the employee as it is tax, USC and PRSI free for both.
The benefit must be non cash therefore a voucher or gift card for the purchase of goods would meet the conditions of the scheme.
You can only give one voucher once a calendar year. The maximum value of the voucher can be up to €500. This voucher is tax free for the employee and tax free for the employer (no tax/usc/prsi). The voucher cannot be exchanged for cash in full or in part. The voucher does not form part of a salary sacrifice arrangement. The business must provide the voucher to the employee. The voucher must be paid for out of the company funds, e.g. company bank account or company credit card.
If the benefit provided exceeds €500 the full benefit is taxable.
All cash payments are salary and are fully taxable.
Please note that the director/employee cannot purchase the voucher themselves and then seek reimbursement from the company.
A €500 cash payment to an employee could cost the employer over €1,000 for a higher rate taxpayer. Under this small benefits scheme the total cost to the employer is €500.