Where an employer pays a medical insurance premium on behalf of an employee, the employer is required to pay the net premium (80%) to the insurance company and must also pay the balance of 20% (Tax Relief at Source) of the premium to the Revenue when paying the Preliminary Tax payment to the Collector General.
An employee is taxable on a BIK equal to the gross value of the insurance premium (100%). They are still however, entitled to claim tax relief from Revenue in respect of the gross premium and the appropriate tax credit (20% of the gross premium) will be granted to the employee in his annual tax credit certificate.
Employers PRSI is also chargeable on the gross premium.
Many employees don’t realise that they have to phone Revenue to claim the tax credit due on medical insurance where the medical insurance is provided as a benefit in kind. Where the medical insurance is paid direct by the employee the tax relief is granted by reducing the amount of the premium payable by 20% (Tax Relief at Source). Sometimes even Revenue’s own staff don’t realise that an employee has to claim a tax credit when the medical insurance is paid by the employer as a benefit in kind