Tax-free gift vouchers for directors and employees

Under Irish Revenue’s Small Business Exemption Scheme, directors and employees can receive a non-cash bonus of up to €1,000 once a year. This is an excellent opportunity for companies to provide tax-free bonuses in Ireland without incurring additional taxes.

The most common way to do this is through vouchers or gift cards, making it a tax-efficient reward for your staff during the year or as a special bonus this Christmas.

So long as you follow specific guidelines, neither your company nor your employees will pay PAYE, PRSI, or USI, potentially saving your company over €1,200 in tax per employee

If you haven’t yet taken advantage of the Small Benefit Exemption Scheme, it’s crucial to do so before 31st December. Remember, tax-free employee vouchers in Ireland can only be claimed once a year and can’t be carried forward!

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When to give tax-free vouchers?

Vouchers are popular amongst companies in Ireland who want to give staff bonuses tax-free.

It’s also popular with owners/directors of small businesses with their spouses working in the same establishment, as they could benefit from up to €1000 in tax-free vouchers. Note that directors and spouses must be on the payroll to avail of this scheme.

No paperwork is involved, and you don’t need to file a separate tax return to avail of the scheme. Business owners should record the invoice for the total value of tax-free gift cards for employees ordered, and the invoice is treated as a fully deductible business expense for accountancy purposes. There is no need to adjust payroll – provided the following rules are followed.

The Small Business Exemption Scheme Rules

  • Must be purchased from business funds

    Tax-free vouchers must be purchased from the business bank account or credit card. It is important to note – employees cannot buy a voucher themselves and seek reimbursement from the company.

  • Twice per year

    Only two vouchers can be paid to an individual in any year, even if you do not avail of the maximum annual allowance of €1,000. If you give more than two bonuses yearly, only two will qualify for tax-free status.

  • Non-cash format

    The gift voucher cannot be converted into cash to qualify for the Small Business Exemption.

  • A salary sacrifice is not allowed

    You cannot fund the scheme by deducting your employee's salary. You must get invoiced for the rewards and pay this external to payroll.

  • Recipients need to be on payroll

    Directors who avail of this scheme must be on the company's payroll to qualify.

How much tax can I save per €500 voucher?

Small Business Exemption Rules Normal payroll in order to receive €500 (i.e. after tax)
Gross payment €500 €1,042
PAYE 0% @ 40% = €417
PRSI – employee 0% @ 4% = €42
USC 0% @ 8% = €83
Total employee tax €0 €542
Net payment €500 €500
PRSI – employer tax 0% @ 10.75% = €112.015

Total tax saved: €654

How to avail of tax-free vouchers

Employers can use the scheme at any time, as long it is only used once a year per employee.

1. Choose a voucher

The voucher can be up to €1,000, and the scheme can be split between two vouchers. For instance, you can purchase two vouchers for €500 each annually.

2. Purchase the voucher

When you have made the purchase, make sure that you keep the invoice. We recommend using online bookkeeping software to make sure you are organised.

3. Tax-deductible expense

Treat the invoice as a tax-deductible expense. Your accountant will look for these records when doing your tax return. Get in touch if you have any questions.

What gifts are tax deductible in Ireland?

Universal gift cards
Companies like One4All, Allgo, and Perx offer a voucher that can be used in many different stores in Ireland.
Store vouchers
Choose your employees favourite shop, department store, or supermarket.
Experience vouchers
Spa treatments, gym memberships, or concert tickets are all good ideas.

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