Finance Bill 2022
Finance Act 2022 became law on the 15th of December 2022. Section 22 of the Act, which applies from the 1st of January 2023, provides for the removal of an income tax BIK charge in respect of an employer contribution to an employee’s PRSA contract made after that date.
What is the change?
Prior to the 1st of January 2023, an employer contribution paid to an employee’s PRSA was a Benefit in Kind (BIK) for income tax purposes for that employee, but:
- The BIK was not put through the PAYE system and did not attract a USC or PRSI charge.
- The employer contribution was treated for the employee, as if it were a personal PRSA contribution and so employee’s tax relief was limited by the age related % limits and the €115,000 earnings limit in respect of all personal pension contributions. Section 22 of Finance Act 2022 make two changes to this position with effect from the 1st of January 2023:
- It amends s118(5) of the Taxes Consolidation Act 1997 to insert ‘contribution to a Personal Retirement Savings Account’ to a list of employer funded benefits which are exempt from an income tax BIK charge in the hands of an employee. Employer contributions to occupational pension schemes fall under the same BIK exemption
- It removes the provision which deemed an employer PRSA contribution to be an employee PRSA contribution for income tax relief purposes.
- This frees up the employee tax relief limits for personal and AVC contributions only.
Will this change apply to 20% directors as well?
- Yes, as long as at the time of payment of the employer PRSA contribution they are an employee of the employer for Schedule E taxation purposes.
Should you wish to discuss any of the above or need any further information or advice, please do not hesitate to contact a member of our advisory team at Jim@hegarty.ie, Niamh@hegarty.ie, Frank@hegarty.ie & Ross@hegarty.ie or alternatively you can call the office directly on 01 4972544.
Irish Independent Feature
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