What is Benefit-in-Kind (BIK) in Ireland?

In Ireland, Benefit-in-Kind (BIK) refers to the taxation of benefits or perks that employees receive in addition to their salary. One common form of BIK is employer-paid medical or health insurance, which is considered a taxable benefit for employees. Here's an overview of how BIK on medical insurance works:


1. Employer-Paid Medical Insurance

If your employer covers the cost of your private health insurance, the amount paid on your behalf is treated as a taxable benefit. This means the value of the insurance is added to your gross income, and you will be taxed on this amount.


2. BIK Taxation

The value of the employer-paid medical insurance is added to your taxable income, and you must pay taxes on it, including:

  • Income Tax
  • Universal Social Charge (USC)
  • Pay-Related Social Insurance (PRSI)


These taxes are applied at your marginal rate, meaning the total tax owed depends on your income level and tax bracket.


3. Tax Relief on Medical Insurance Premiums

Despite being taxed on the insurance value, employees may be eligible for Tax Relief at Source (TRS) for medical insurance premiums. This means that employees can claim a tax deduction of up to 20% of the premium amount, potentially lowering the overall tax burden on the insurance benefit.


Example Scenario

  • If your employer pays €1,000 for your private health insurance, this amount is added to your total taxable income.
  • You will pay income tax, USC, and PRSI on the additional €1,000 at your applicable tax rates.
  • However, through tax relief, you can deduct up to 20% of the premium. For example, 20% of €1,000 is €200, which may reduce the effective taxable value of the premium.

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