Benefit in kind (BIK) on an electric car provided by employer
In Ireland, employers can offer electric vehicles (EVs) to employees with significant tax advantages through Benefit-in-Kind (BIK) exemptions and discounts. These incentives aim to promote the adoption of environmentally friendly transportation options.
BIK one EV’s what the effects on employers and employees in 2025?
Definition of Electric Vehicles for BIK Purposes
For BIK incentives, an electric car is defined as a vehicle powered solely by electricity. Hybrid vehicles, which combine electric and traditional fuel sources, do not qualify for these specific benefits. This distinction applies to both new and used vehicles provided to employees.
BIK Exemptions and Reductions (2023-2027)
From January 1, 2023, to December 31, 2027, partial BIK relief is available for electric cars made available for employees' private use. This relief reduces the Original Market Value (OMV) of the vehicle, thereby lowering the taxable benefit. The applicable reductions are: 2023 to 2025: €35,000 reduction in OMV. 2026: €20,000 reduction in OMV. 2027: €10,000 reduction in OMV. Additionally, for the years 2023 to 2025, an extra €10,000 reduction can be applied, bringing the total reduction to €45,000 during this period. If these reductions bring the OMV to zero, no BIK charge arises. Any remaining OMV after applying the reduction is subject to BIK as usual.
Practical Example
Consider an employee provided with a fully electric company car in 2025, with an OMV of €50,000. The total applicable OMV reduction for that year is €45,000 (€35,000 standard reduction plus €10,000 additional reduction). Subtracting this from the OMV leaves a taxable amount of €5,000. Assuming the employee drives 35,000 business kilometers annually, the applicable BIK rate is 18%. Thus, the annual BIK taxable amount would be €900 (€5,000 x 18%).
Key Points to Remember:
Employers who provide EV charging points can also benefit from BIK exemptions:
On Business Premises: No BIK applies if the charging facility is available for use by all employees and directors.
At Employees’ Residences: Effective from January 1, 2025, employers can install EV charging points at an employee’s or director’s main private residence without incurring a BIK charge, provided:
- The employer retains ownership of the charging facility.
- The employee or director has private use of the employer’s electric vehicle.
- The charging point is installed at a residence in the State, serving as the employee’s or director’s primary residence.
This exemption does not apply if the employee or director uses a hybrid electric vehicle.
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