2022 has been a tough year, and your employees could do with some appreciation and recognition for their hard work. Rewarding them for their performance and accomplishments over the year will motivate them to increase their productivity – which is key since your employees are your company’s most valuable asset. With the holiday season coming up, you can pay them up to €1,000 with a tax-free non-cash bonus.
How The Tax-free Gift Vouchers Work
The Small Benefit Exemption that started on 1 January 2022 allows employers to give their employees two small benefits, tax-free, every year. No paperwork is needed, and you won’t need to make returns. Your company simply gets an invoice for the total value of tax-free vouchers that have been ordered. The Irish Revenue will treat this as a deductible business expense.
In a nutshell: Your company can reward the staff without worrying about PAYE, PRSI, or USC. This means you can save over €1,200 in taxes for each employee while giving them their 2022 Christmas bonus.
What Are The Rules?
- The benefits should not be in cash, and neither can they be redeemed for cash. These invoices can only be used for purchasing goods and services.
- The total value of the benefits should not exceed €1,000.
- If the employees receive more than two benefits per year, only the first two will be eligible for the tax-free status
- Any unused amount cannot be rolled over into the next year.
- Does your spouse also work in the same company you own? For such directors and spouses to benefit from this scheme, they must be on the payroll.
How To Use This Benefits Scheme
- Pick a voucher (whole €1,000 or split amounts within the year, e.g. two €500 vouchers)
Popular options include:
- Universal gift cards which give the recipient more flexibility to choose a store themselves;
- Picking a specific supermarket or shop yourself and using its voucher – so the employees will pick their gifts from there;
- Getting ‘experience vouchers’ – e.g., passes to amusement parks that can be used by the whole family, or self-care vouchers that are particularly popular amongst millennials, like spa treatments or gym membership.
- Purchase the voucher and keep the invoice. Bookkeeping software comes in handy here to enable you to keep track of everything.
- Treat it as a tax-deductible expense that your accountant will use when making tax returns
No “Crafty Ways Around”
Note that the company cannot fund the voucher by deducting it from an employee’s salary. Neither can the employees buy the voucher themselves and go back to the company to be reimbursed. The vouchers are purchased directly from the business’ funds, whether it’s from its bank account or credit card.