Employers in Ireland must deduct taxes from employees’ pay. These taxes include Pay As You Earn (PAYE/income tax), Pay Related Social Insurance (PRSI) and Universal Social Charge (USC). The amount deducted will depend on how much the employee earns and any allowances or credits the employee might claim. Employers are obliged to make contributions to PRSI.
Pay related social insurance (PRSI)
Employers’ and employees’ social insurance contributions are paid into the Social Insurance Fund.
The social insurance rate contributions by the employer are:
8.8% on income up to €395 per week
11.05% on income in excess of €395 a week.
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Employers deduct tax on the income of their employees directly from their salaries through the Pay As You Earn (PAYE) system. The amount of tax that the employee contributes depends on the amount of the income that they earn and on their personal circumstances. There are several tax credits and reliefs that may offset employees’ tax liabilities, which they may apply for through the Revenue Commissions.
Tax rates and bands
INCOME TAX RATE
Single, widowed or a surviving civil partner without qualifying children
€36,800 at 20% Balance at 40%
Single, widowed or a surviving civil partner qualifying for Single Person Child Carer Credit
€40,800 at 20% Balance at 40%
Married or in a civil partnership (only one spouse or civil partner with income)
€45,800 at 20% Balance at 40%
Married or in a civil partnership (both spouses or civil partners with income)
€45,800 ( with an increase of 27,800 max at 20% Balance at 40%
Pay related social insurance (PRSI)
PRSI contributions entitle employees that meet the qualifying criteria to the full range of social insurance payments that are available from the Department of Employment Affairs and Social Protection.
The social insurance rate contributions are 4.0% by the employee if they earn more than €352 per week.
Employees that earn €352 or less per week (before tax deductions) do not pay any social insurance. However, they are still covered by Class A social insurance, and their employer still pays PRSI contributions.
Universal social charge (USC)
All employees who earn more than €13,000 annually owe USC, which is another progressive tax. Their employer deducts it at the time of processing payroll through PAYE (Pay As You Earn). Contributions to USC determine the eligibility of employees and their family members for many insurance benefits, including unemployment assistance.
The USC is due on gross income, including notional pay (the value of non-cash benefits, such as benefit-in-kind) and pension contributions, after relief and allowances have been applied.
Universal social charge
Up to €12,012
From €12,012.01 to €21,295
From €21,295.01 to €70,044
From €70,044.01 and over
Self-employed income over €100,000
Benefits in Kind
All employees who earn more than €1,905 per year pay income tax, PRSI and USC on the value of any benefits and benefits in kind they receive. The employer makes the deduction during payroll.
The rules that apply to benefits in kind, however, vary. Generally, the value of the benefit in kind is the cost the employer incurs for the benefit unless the employee has made any contribution as well. Special rules apply to the following benefits in kind:
Car and other motor vehicles
Provision of living accommodation
The following benefits in kind are taxable:
Free or subsidised accommodation without the job requiring the employee to live there
Awards that have been suggested through staff schemes
Private use of a company credit or debit card
Free or subsidised childcare facilities provided by the employer or an independent facility
Private use of company car or van if the employee doesn't incur a certain amount of mileage for business purposes. The tax owed can be reduced if the employee contributes to insurance costs, motor tax and petrol.
Discounts on products or services that are sold for less than the employer's cost
Employer contributions to an employee's Personal Retirement Savings Account (PRSA)
Exceptional performance awards (cash, vouchers or gifts)
Loans where no interest is charged or the rate of interest is 'preferential'
Medical insurance premiums
Shares in a company that are given free of charge or at a discounted price
Sports and recreation facilities that are provided by the employer but not inclusive to all staff. Subscription fees to other sports facilities, which are only extended for certain employees
Subscriptions to a professional body where membership of the body is not a requirement of the job
The following benefits in kind are not taxable:
Free or subsidised accommodation with the job requiring the employee to live there
Cycle to Work Scheme bicycles and safety equipment
Canteen meals that are free or subsidised and extended to all employees
Courses or exam fees for classes that are necessary to the employee's duties or are directly related to increasing the effectiveness of the employee's performance
Employer pension contributions to an approved scheme or PRSA
Examination awards for qualifications that are relevant to employee duties
Entry visas and work permits
Information technology equipment, including mobile phones provided for business use (where private use is incidental)
Long-service awards if the service is at least 20 years, the award is a physical gift (not money, vouchers or bonds) and the cost of the award does not exceed €50 for each year of service
Medical services when the employer pays a retainer to a general practitioner. This includes one medical check-up per year and any additional ones requested by the employer
Security assets or services in cases where there is a severe threat to an employee's physical safety due to the job. Applies if the security assets are equipment or structures and do not if they are modes of transport, living accommodation or land, or if the use of the security assets for other purposes is incidental and the security services improve the employee's physical security
Small non-cash benefits worth €500 or less received just once a year. This treatment does not apply to cash payments, which are taxable in full
Subscriptions to a professional body where membership of the body is a requirement of the job.
Taxation of benefits (other than benefits-in-kind), is made on the value of the benefit. For example, an employer provides a holiday voucher worth €2,000. This is treated as €2,000 income for tax purposes and is taxed accordingly.