New Year, New Taxation System for Ireland’s Company Car Drivers

The new year has seen the start of a new benefit-in-kind taxation system for Ireland’s company car drivers.

It incentivizes drivers to choose vehicles with lower CO2 emissions as part of the government’s Climate Action Plan 2021 to lower emissions by 2030.

The system is based on the original market value (OMV), the number of kilometers driven, and the CO2 emissions of the vehicle. The previous tax system was based only on OMV and distance driven.

To work out the new benefit-in-kind payable, there are five categories of car based on CO2 emissions  (A to E) and the percentage of OMV applicable and four kilometer bands. See table below:

Lower limit	Upper limit	A	B	C	D	E
Kilometers	Kilometers	%	%	%	%	%
	26,000	22.5	26.25	30	33.75	37.5
26,001	39,000	18	21	24	27	30
39,001	52,000	13.5	15.75	18	20.25	22.5
52,001	--	9	10.5	12	13.5	15

Source: Grant Thornton Ireland

The CO2 emission banding is based on the following criteria:

• A - 0g/km up to and including 59g/km
• B - More than 59g/km up to and including 99g/km
• C - More than 99g/km up to and including 139g/km
• D - More than 139g/km up to and including 179g/km
• E - More than 179g/km

Example of the new tax system

A driver has a company car with an OMV of €28,000. 

The car produces 85g/km in CO₂ emissions, placing it in category B. As the driver covered 41,000 kilometers in the year, the cash equivalent is equal to the OMV x 15.75% -- this case €28,000 x 15.75% -- which equals €4,410.

Drivers with vehicles in higher emission cars are likely to pay more in tax than they have previously.

Reducing zero emission benefit

However, that is not the only change. Drivers choosing zero-emission battery electric vehicles will see a phasing-out of the 0% benefit-in-kind treatment to such vehicles.

From 2023 to 2025, the cash equivalent will be calculated based on the OMV reduced by the following amounts:

• €35,000 in respect of vehicles made available in the 2023 year of assessment;
• €20,000 in respect of vehicles made available in the 2024 year of assessment; and
• €10,000 in respect of vehicles made available in the 2025 year of assessment.

If the reduction reduces the OMV to nil, there is no benefit-in-kind payable.

There is also a change to the benefit on company vans. This increases from 5% to 8% of the OMV from the start of January 2023.