Considering a new job offer and planning on negotiating an additional benefits package, so if an employer makes pension contributions to an occupational scheme that’s fully deductible from their corporation tax what are the implications in relation to a PRSA?
In this scenario I would be keeping the total contributions by both myself and the employer to the age related limits.
I’m just curious what the companies out lay would be as opposed to asking for an addition
The employer contributions are not restricted by age related or income limits
What I was wondering was if by staying below the age restrictions when including the employer contribution does this allow them to claim this back against their corporation tax such as in the occupational scheme.
I was wondering this as once it stays below the age restriction it’s not considered a BIK for the employee.
"Employer contributions to an approved occupational pension scheme (OPS) on behalf of employees are a not a benefit in kind in their hands. Contributions to an employee’s Personal Retirement Savings Account (PRSA) are a benefit in kind.
However, the benefit is taxable only where the aggregate of employer’s and employee’s PRSA contributions exceed the employee’s age-related limit.
You should not deduct tax under Pay As You Earn (PAYE) or Pay Related Social Insurance (PRSI) from your employer contributions if the scheme is either an OPS or a PRSA.
From 1 January 2016, Universal Social Charge (USC) is no longer payable on contributions you make to an employee's PRSA."
https://www.revenue.ie/en/employing...ers/other-benefits/pension-contributions.aspx
...so just for my own clarification if an employer contributes €500 towards an occupational pension scheme for an employee the net cost to the company is €0 as they deduct this from their corporation tax bill... Or am I still confused?
I think you're still a bit confused. Let's say my company has €1,000 in its bank account.
Does that help?
- If I do nothing with this €1,000 and leave it sitting in the company bank account, I'll pay Corporation Tax on it. Assuming 12.5% Corporation Tax rate, I'll be left with €875.
- If I decide to buy €1,000 worth of office stationery for my business, I'll pay no corporation tax and I'll have €1,000 worth of stationery.
- If I decide to give my employee a bonus of €1,000 into their salary, it will cost me extra as I'll also have to pay Employer PRSI on top of the €1,000. My employee won't get €1,000 as they'll pay Income Tax, Employee PRSI and USC. If they're paying high rate of everything they'll see about €500.
- If I put the €1,000 into an Occupational Pension Scheme as an employer contribution for my employee, I won't pay Employer PRSI so it will cost me the €1,000 - no more; no less. My employee will have an extra €1,000 in their pension fund.
Yes, deductible as a business expenses before calculating Corporation Tax.
It’s probably too detailed for this thread, but “ordinary” contributions as defined are fully deductible upfront. “Special” contributions as defined need to be spread by the company over up to 5 years. Very loosely, special contributions are “catch-up” contributions for previously unfunded or underfunded pensionable service.
I think you are confused. If the Employer gives you an increase in salary OR pays that same amount into a Pension, it has the same impact in terms of Corporation Tax . Both are treated as expenses and thus reduce Profit before Corporation Tax is calculated.
If they pay it as Salary however, they must also pay PRSI . So the total cost to the Employer is slightly higher.
Yeah I’m get turned around quite a bit on it but that’s also a helpful clarification.
It does to a certain extent yes thank you, I guess what’s confusing me a lots is the somewhat contradictory information online, like this from pensionauthority.ie
“Employer contributions to pension arrangements are fully deductible for corporation tax purposes up to certain limits”
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