What do you need to know about buying a company car in Ireland?

Planning on buying a company car? What is the best way to plan this for your company from a Tax implications point of view?  In this article we will discuss some of the main considerations regarding Benefit in Kind (BIK)  for companies in Ireland. Buying a car can be such a great feeling as a small business owner. Make sure you have the best accounting advice to do this correctly. 

Like any other business decision, determining whether to purchase a company car is something you need to weigh up before making a final decision. To do this, it’s important to consider the true costs of BIK (Benefit In Kind) and make sure that your purchase doesn’t interrupt your company’s future plans.

What actually is a company car?

A company car is any vehicle the company purchases for you for business use. A company car is a vehicle provided by an employer for both business and private use. To justify the use of a company car, the employee is usually required to travel significantly for their role, such as a regional sales manager.

 All expenses relating to the company’s vehicles can be expensed through an entity created for this purpose. This includes fuel, repairs, insurance and taxes related to business activity using the car. 

Can I use a company car for personal use and what are the Tax implications?

Vehicles can be used for personal as well as business use and there are tax implications of that. Make sure you know the rules before deciding to use a car for both.

In general, if a company car is available for an employee’s private use then the employee is chargeable to PAYE and PRSI in respect of that use. It is important to note that travelling to and from work in a company car is considered private use.

The notional pay to which PAYE and PRSI must be applied is determined by reference to the “cash equivalent” of the private use of the company car. The cash equivalent is determined by applying a percentage based on business kilometres to the “Original Market Value” (OMV) of the vehicle supplied (whether the vehicle is owned, acquired new or second-hand or leased by the employer).

Unfortunately, for those who buy company cars (for ease of explanation we will say car), you cannot claim the full cost of it back in the first year of purchase. Should you buy the car outright, you may claim capital allowances in the form of depreciation at a rate of 12.5% of the cost of it each year that you own the car.

How much you can claim is limited to €24,000 in cars in Category AB and C  CO2 emissions. That rate reduces for category D & E  emissions by 50% and is not allowable at all for category F & G emissions.

BandCO2 Emissions – grams per km
A0 – 120g
BMore Than 120g/km up to and including 140g/km
CMore Than 140g/km up to and including 155g/km
DMore Than 155g/km up to and including 170g/km
EMore Than 170g/km up to and including 190g/km
FMore Than 190g/km up to and including 225g/km
GMore than 225g/km

What many companies and company owners are doing is to lease vehicles. This can be more tax efficient because vehicle leases can be fully written off.However, there is a reduced pro-rata rate above €24,000

If you are buying a jeep or a van, these vehicles will have the same restrictions as passenger vehicles. In order to register this vehicle in France, you’ll need to pay €24,000.

When considering whether or not to buy a company car, another thing to consider is the BIK (Benefit In Kind). This refers to what an employer has paid for their employee to have a company-car for private use.

What is classed as Business Mileage?

Business mileage is mileage incurred in the normal course of business. This could include travelling to appointments, business meetings and travelling to temporary work sites.

Travelling to and from your normal place of work does not count towards business miles.

In this context, it’s worth reviewing the Revenue’s definition of what constitutes your ‘Normal Place of Work’ to ensure your business travel fits the criteria –  https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/normal-place-of-work.aspx 

How BIK is calculated in Ireland

The BIK of a vehicle is calculated by multiplying the vehicle’s OMV by 30%.

The Benefit in Kind (BIK) is calculated as the annual standard value of a vehicle multiplied by 365 days, divided by a coefficient of €40k per OMV. The charge in tax is €5,880

€40,00030%€12,000 (cash equivalent)

That’s why many companies and company owners are leasing vehicles for their business. Leases are fully tax deductible, with a reduced rate if the car cost exceeds €24,000.

BIKMarginal Rate of TaxTax Charge

If you are buying a jeep or a van, that is treated the same as other vehicles; however, it will not have the same restrictions as passenger vehicles, i.e. the €24,000 threshold.

Lower LimitUpper Limit% of OMV
Zero –24,00030%

Another thing to consider when buying a company car is the BIK (Benefit In Kind) tax charge. This applies for employees or directors that use a company vehicle for personal use, which can be quite costly.

However, for Commercial Vehicles and Vans the rate of BIK is reduced to 5%. Note an N1 Commercial Vehicle which has five seats is classified in the same way as a passenger car for purposes of BIK.


Company cars have exceptions when it comes to the company car policy.

  1. Car-Pools – Employees are required by company policy to use company-owned cars for business purposes. Drivers must not regularly keep their cars overnight at or near their homes.
  2. Electric Vehicles – This exemption for €50,000 or less electric vehicles allows employees to use their personal vehicles for business and personal use until the 31st December 2022. Where the car costs more a partial exemption is given by reducing the cost of the vehicle to €50,000.

We do hope you found this article useful when trying to understand BIK implications for purchasing a company car. We recommend that you reach out to financial advisors and accounting professionals in Ireland to give you expert advice.