What is a Car Cash Allowance?
The Car Cash Allowance is used to compensate the employee for the use of their own car. One of the advantages for the employee is that 50% (up to €1,170 in a calendar year) of the Car Allowance may be considered as non-taxable.
When is an employee eligible for the 50% Tax Deduction?
There are four conditions that must be met for the employee to benefit from the car allowance being only 50% taxable. These are:
- The employee uses their own personal car;
- The allowance is specified in either the employee's contract or in a collective agreement;
- The employee is not a person who is in a controlling position within the company, such as director or partner;
- The employee does not make use or benefit from any other car which is owned by the company.
More information can be found here: MTCA Fringe Benefits Guide
How does one pay Car Allowance on Buddy?
If is recommended that in the Salary Details of the employee, you set the Car Allowance as a Recurring Allowance. This will ensure that each payslip for that employee which you Calculate & Save during Payroll will include the Car Allowance automatically.
The most common amount is €195 monthly, as this reaches the €1,170 non-taxable limit exactly within the year.
How does Buddy calculate the Car Allowance?
Car Allowance in Payslip
When making use of the Car Allowance, Buddy will show the full allowance amount in the payslip as earned emoluments. However, a portion as described above, will not be included in the Taxable Gross, and hence the tax will be calculated only on the taxable portion.
In the below screenshot, you can note that the full Car Allowance is included in the earnings. However, the employee is only taxed for €1097.50 of their earnings (due to €97.50 being non-taxable).
Car Allowance in Tax Forms
Moreover, in the Tax Forms such as the FS5 and FS3, the Car Allowance will be listed as a Fringe Benefit automatically.
In the screenshot below, you can see the FS3 for the payslip issued above. The important fields o note are:
- Field C3 shows the taxable portion of the Car Allowance, which is included in the Total Taxable Gross in C4
- Field Cat 1 C5 shows the total amount of the Category 1 Fringe Benefits (i.e. the Car Allowance), including the non-taxable portion
- Field C8 shows the non-taxable portion of the car cash allowance.