Round sum allowances

If you pay your employee round sum expense payments (weekly, monthly, yearly or otherwise), the payments must be treated as pay and taxed. For example, if you pay €200 per month to your employee as a living or rent allowance payment, this amount must be treated as pay and taxed.

Some typical round sum payments may include a:

  • car allowance
  • fuel allowance
  • living or rent allowance
  • clothing allowance
  • tea or lunch allowance
  • travel allowance.

Your employee may incur actual expenses when working for you. Where this occurs, you can reimburse these expenses. This reimbursement will not be treated as taxable pay where:

  • your employee incurred them wholly, exclusively and necessarily when carrying out the duties of their employment
  • the expenses were repaid on the basis of vouched receipts.

Note

Your employee may decide to personally claim expenses and allowances reflecting the actual costs incurred by them. Where this happens and you have reimbursed their expenses, the amounts paid by you will be treated as taxable salary.