A new company car tax system has come into force in Ireland from the start of this year, alongside plans to phase out the zero benefit in kind tax rating for electric cars over the next four years.
From 1 January 2023 the benefit in kind (BIK) tax on a company car will be based on the original market value (OMV) of the car, its annual business mileage and, for the first time, its CO2 emissions.
The Irish tax authorities have created five CO2 bands, labelled A to E, and drivers of company cars with higher emissions will have a higher BIK tax charge.
CO2 EMISSIONS CATEGORIES
These bands are used to calculate the BIK cash equivalent of the car, based on a percentage of its OMV.
Further discounts are available for higher business mileage drivers who drive 26,001-39,000 kilometres on business per year; 39,001-52,000km per year; and more than 52,001km per year.
BIK CASH EQUIVALENT (% OF OMV DETERMINED BY CO2 AND BUSINESS MILEAGE)
According to tax experts BDO Ireland: “For many users with cars in the middle of the emissions range, it is likely that the BIK charge under the new system will remain the same as at present. Those with cars in the highest emission range (over 179g/km) will however see an increase in the percentage benefit-in-kind charge across all mileage bands, with a new maximum rate of cash equivalent/benefit-in-kind of 37.50%."
EV company car tax
Electric cars have been zero rated for tax until now, but under the new rules their BIK tax charge will be based on the OMV of the car reduced by: €35,000 in 2023; €20,000 in 2024; €10,000 in 2025; and €0 in 2026. However, there will be no tax due on workplace charging, so long as the chargers are made available to all employees.
Van tax
Employees who have the private use of a company van will see their tax bill rise to 8%, from 5%, of the vehicle's OMV from 1 January 2023.