Remuneration Packages
- Salary and Benefits
- Share Options
- Lump Sum Payments
- Re-imbursement of Motoring Expenses
- Re-imbursement of Subsistence Expenses
- Removal and Relocation Expenses
Salary and Benefits
What is an employee taxed on?
An employee is taxed on his/her salary, fees, wages, commissions, bonus etc. as well as any benefits from the employment. In other words, payments in cash form and non-cash benefits provided by the employer are taxable on the employee.
What are taxable benefits?
Benefits-in-kind (e.g. private use of a company car, free or subsidised accommodation and preferential loans)received from an employer, by an employee whose total remuneration (including benefits-in-kind) is €1,905 or more in a tax year, are taxable. Where the employee receiving such benefits is a director of the company concerned, the benefits are taxable regardless of the level of remuneration. The liability to tax also applies in respect of benefits provided by an employer for a member or members of an employee's family or household.
How is the tax paid?
PAYE and PRSI are applied by the employer to the best estimate that can reasonably be made of the amount of the notional pay or taxable benefit that is chargeable to income tax, in respect of a benefit provided to an employee. With effect from 1 January 2004, PAYE, PRSI and the Health Contribution must be operated by employers, in respect, of the taxable value of most benefits-in-kind and other non-cash benefits provided by them for their employees.
For more detailed information see Employer's Guide to operating PAYE and PRSI for certain benefits.
Share Options and Other Share Schemes
What are Share Options?
Share Options arise when employees or directors are offered shares by their employers or granted an option to acquire shares in their employers company, at a favourable price. Acquisition of company shares by employees or directors at a favourable price is a perquisite of the office or employment and is chargeable to income tax. A charge to Capital Gains Tax may also arise in certain instances.
Brief overview of the Main Schemes
- Share Option Schemes,
- Approved Profit Sharing Schemes,
- Employee Share Purchase Schemes,
- Employee Share Ownership Trusts,
- Savings - Related Share Option Schemes.
More detailed information is available in 
Booklet IT 62 A Guide to Profit Sharing Schemes. (PDF, 350KB)
Lump Sum Payments on Redundancy/Retirement
Lump sum payments on redundancy or on retirement, qualify for special tax treatment - they may be exempt from tax or may qualify for some relief from tax. A lump sum paid under the terms of a contract of employment is taxable in full and does not qualify for exemption or relief.
More detailed information is available in Leaflet IT 21 Lump Sum Payments on Redundancy/Retirement.
Re-imbursement of Motoring Expenses to Employees
Payments by an employer, which are no more than re-imbursement of allowable expenses actually incurred by an employee, may be paid free of tax in certain circumstances. Employees' expenses qualify for deduction by them only where they are incurred "wholly, exclusively and necessarily" in performing the duties of the employment. Expenses, which are incurred by employees, in travelling to and from their place of employment, are not allowable for tax purposes and any re-imbursement of these expenses must be treated as pay. Where an employee's allowable expenses are re-imbursed free of tax by an employer, the question of an income tax claim by the employee for those expenses does not of course arise. More detailed information is available in Leaflet IT 51 Employees' Motoring Expenses.
Re-imbursement of Subsistence Expenses to Employees
Payments by an employer, which do no more than re-imburse an employee for allowable subsistence expenses which were actually incurred, may be made free of tax in certain circumstances. The expenses concerned must have been incurred "wholly, exclusively and necessarily"; in the performance of the duties of the employment. More detailed information is available in Leaflet IT 54 Employees' Subsistence Expenses.
Removal and Relocation Expenses
What is the tax treatment of removal and relocation expenses?
The payment or reimbursement of certain removal/relocation expenses, incurred by an employee in moving house to take up employment, may be made free of tax by an employer. The employer must ensure that the following conditions are satisfied:
- The reimbursement to the employee or payment directly by the employer must be in respect of removal/relocation expenses actually incurred,
- The expenses must be reasonable in amount,
- The payment of the expenses must be properly controlled,
- Moving house must be necessary in the circumstances.
Examples of the type of expenses covered
Expenses which, can be reimbursed free of tax, are those incurred directly as a result of the change of residence and include such items as:
- Auctioneer's and solicitor's fees and stamp duty arising from moving house,
- Storage charges,
- Travelling expenses on removal.
With the exception of any temporary subsistence allowance, all payments must be matched with receipted expenditure. The amount reimbursed or borne by the employer may not exceed expenditure actually incurred. Any reimbursement of the capital cost of acquiring or building a house or any bridging loan interest or loans to finance such expenditure would be subject to tax. In effect, payment free of tax is restricted to the reimbursement of actual outgoings of a revenue nature incurred at the time of the move.
