The Tax Department has announced in October 2018 its intention to terminate the previous tax practice in relation to the benefits in kind, and instead provide clear guidelines as to the proper valuation of the benefits in kind, for the purpose of consistency, clarity and uniformity, clearing any ambiguities.

The broad definition of the Article 5 of the Income Tax Law in relation to the tax treatment of the benefits in kind, necessitate for a change as the previous tax practice was leaving room for the taxpayers to define and calculate the value of the Benefits in Kind in accordance to their discretion, allowing a more relaxed approach.

Based on the guidance, clear provisions for the valuation of the benefits in kind are set out, applicable as from 01.01.2019. Nevertheless, the subject provisions may be applied for previous years as well.


Benefit in Kind ("BIK") is considered to be the benefit that is, or is deemed to be, granted in connection with any employment or the holding of an office.

The benefit can be in the form of cash or any other cash equivalent received under an employee – employer relationship, or by a connected person1 of the employer, or by third parties. The benefit is also applicable to self-employed persons, but the tax treatment will not be covered in the present brochure.

I. Application

The benefits in kind apply to the below individuals:

  • Employees:
    • With or without employment contract
    • Under a part time or full time employment
    • Existing or former employees
  • Individuals, who are members of the family / household of the employee
  • Individuals who hold or considered to hold an office:
    • Directors
    • Individuals who exercise duties similar to the Directors'
    • Individuals who exercise control

II. Categories of benefits in kind

  • Benefits related to the use of cars
  • Benefits related to accommodation
  • Other benefits


I. Benefits Related To the Use of Cars

A BIK related to the use of cars arises where there is a usual element of private use as defined below:

  • The car is at the disposal of an individual, or;
  • The car is used on non-working hours, or;
  • The car is not kept at the premises of the employer during the night or the weekends, or;
  • The car is used for private purposes;

The BIK does not arise to employees who are drivers, messengers, distributors or other persons, for whom the use of the car is necessary for the execution of their duties, provided that they use the car during working hours.

The three types of benefits in kind related to the use of cars are as follows:

  1. Use of saloon car belonging to the employer
  2. Reimbursements / use of cars belonging to the employee, for business purposes
  3. Use of commercial car (van) belonging to the employer

a. Use of saloon car belonging to the employer

A BIK arises where there is a usual element of private use and its value is calculated as follows:

b. Reimbursements / use of cars belonging to the employees for business purposes

Reimbursements for the use of cars belonging to the employees which are used for business purposes are divided into the three following categories:

  • Reimbursement for the wear & tear of the use of cars
  • Reimbursement for both the wear & tear of the use of cars and the fuel expenditure;
  • Reimbursement only for the fuel expenditure;

The valuation of the BIK is further analysed in the below diagram:

Conditions for the use of the "kilometres travelled" basis

In the case that the employer compensates the employee on a "kilometres travelled" basis, then the compensations received by the employee are not considered BIK, if the below conditions apply:


If an individual receives multiple reimbursements either from the employer, or a related party of the employer, or multiple employers (if the individual has more than one employment) in relation to the use of private car or/and fuel expenditure, the deduction of 50% on the reimbursement or the € 1.500 deduction may only claimed once (i.e. in respect of only one reimbursement).

c. Use of commercial car (van) belonging to the employer

Commercial car (van) for tax purposes is considered to be:

  • the vehicle that is manufactured for transportation of goods (rather than for transportation of persons), and
  • with maximum weight 3.500 kg

Benefit is raised from the use of commercial cars in the instance that such use is being made for private purposes.

The BIK is valued at the fixed amount of €500 per year, regardless of the type, model or year of manufacture/registration of the relevant commercial car.

II. Benefits related to accommodation

The provision of assets to the employee when they belong to the employer and/or leased and/or rented by the employer, can be considered as benefits in kind.

The private use of the below assets, falls within the scope of benefits related to accommodation:

  • Accommodation
  • Furniture
  • Boats
  • Aircrafts
  • Machinery

The BIK arises:

  • On the date that the individual moves into the property, if the benefit is related to immovable property
  • On the first day at which the asset is put to the disposal of the individual, if the benefit is related to assets other than immovable property

The annual value of the benefits in kind for the use of assets applies for as long as the asset is at the disposal of the beneficiary and is determined as follows:


The amount paid by the employee in relation to the use of the assets (rent/lease/bills or other expenses) is deducted from the calculation of the BIK.

III. Other benefits

Any other BIK that does not fall within the Use of Car or Accommodation categories mentioned above, is considered to fall into this category.

In general, the value of the benefits in kind in this category is the market value (normal selling price less discounts provided to the general public) reduced by the price paid by the employee. However, the guidance issued by the Tax Authorities provides for specific treatment for the following cases:

Benefit Explanations
Goods/Services which are produced/provided in the business course of the employer, provided to the employee BIK is the difference between the market value of the goods/services, less any amount paid by the employee (subject to a conditional first €500 exemption)
Goods/Services which do not form part of the business of the employer or of a party related to the employer BIK is the higher of: the market value of the good/service less any amount paid by the employee, or
the acquisition cost of the employer for the good/service less any amount paid by the employee
Provision of assets (tangible/intangibles) The value of the BIK depends on whether the asset "forms part of the business activity of the employer" or not.
Repayment of personal expenses: BIK is the price that the employer paid plus any associated costs, subject to certain restrictions
Business trips No BIK arises provided that the daily amount paid is up to €250, or if the actual costs are paid.
A "per diem" payment in excess of the business trip expenses is considered to be BIK. If the trip is of excessive private purpose, the total amount of the business trip is considered to be BIK.
Meals No BIK arises if the meals are provided to all employees or if the meals are provided in the course of a business event of the employer.
In all other cases the BIK is valued as the total cost of the employer
Gifts No BIK arises if: the gift does not exceed the amount of €300, and the employee only received one gift per year, and the employer does not claim the cost of the gift as an allowable deduction in his tax computation
Performance related rewards are not considered to be BIK if the employer will not claim them as allowable deduction
Costs related to the acquisition of tools BIK equals to the cash provided for the acquisition of tools necessary for the executions of the employee's duties
Vacations, various presents and motive awards BIK equals to the cost of the employer for vacations of the employee, his family or both.
Additionally paid vacations / recreation expenses during a business trip are taxable BIK equal to the costs borne by the employer


There are various cases where the employee receives a benefit which is not considered to be taxable as a BIK. It is important however to stress out that as a general principle, exemptions apply only to the extent where the payment or reimbursement to the employee is made against actual costs supported by payment receipts.

Exemption Explanations
Computer Equipment Exempted, unless the employer is a provider of internet services, where the provision of free internet services and other free subscriptions is taxable
Telephone services The payments / reimbursements made in respect of the use of telephones are exempted only if supported by the relevant payment receipts. However, lump sum cash payments are taxable
Childcare facilities Exempted, if the childcare services provided by the employer are within the workplace
Goods consumed in the workspace Exempted, if the goods and services are manufactured / produced / provided by the employer or/and a connected company
Newspapers Exempted, if the subscriptions to newspapers or/and magazines or/and websites are related to the activities of the employer
Awards for long-term service Exempted, if the award does not exceed the maximum amount of €100 per year of service, and no any similar award was given to the receiver in the last 10 years
Subscriptions to professional bodies Exempted, if the professional capacity of the employee is considered to be necessary for the execution of his duties, and for the benefit of the employer
Christmas parties and events Exempted, provided that the cost of the event per employee is reasonable
Uniforms and specialized attire Exempted, when necessary for the execution of his duties. Any payments made by the employer related to the cleaning of the uniforms, are also not taxable
Transportation to the workplace Exempted, if the employer provides specific vehicles for the transportation of the employees, from specific gathering points, to the workplace
Recreation areas Exempted, if allowed to all employees. The payment for a club membership subscription is not taxable, if the membership is for the benefit of the employer and not the employee
Relocation expenses For the employee and his family. The exemption is the lump sum of €9000 or the amount of the actual expenses incurred, if these are supported by the relevant invoices
Training Courses/scholarships to employees Exempted if the courses are necessary for the execution of the duties of the employee, and the expenses include only the course fees and the cost of the necessary books and materials. Taxable BIK only arises, if the main purpose of the training is for the benefit of the employee

Exemptions do not apply where the relevant BIK takes the form of cash.

Any payment receipts which are reimbursed must be kept by the employer for future assessment carried out by the Tax Department.


The benefits are taxed in accordance to Article 5 of the Income Tax Law, by which the value of the benefit is added to the income of the individual. The value of the benefit is calculated according to the guidance as analysed in the present brochure.

The BIK added to the income of the individual is taxed under the progressive tax bands, and the respective tax is withheld via the Pay As You Earn system on a monthly basis.

The individuals are responsible for informing the employer for any benefits in kind received. Failure to declare the benefits in kind entails to additional taxation in accordance to the Assessment and Collection of Taxes Law of 1978.


Kinanis LLC is in a position to assist you with the provision of the following services:

  • Assistance to the computation and the tax treatment of benefits in kind
  • Payroll and Accounting Services
  • Completion and submission of annual tax returns
  • Assistance to tax and legal related matters


1. (a) An individual is connected with another individual if the first individual is the spouse or relative of the second individual, or the spouse if a relative of the second individual, or relative of the husband or wife if the second individual;
(b) a person is connected with any person with whom he is in partnership, and with the husband or wife or relative of any individual with whom he is in partnership;
(c) a company is connected with another company -

(i) If the same person has control of both. or a person has control of one and persons connected with him have control of the other; or
(ii) if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting or the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected,

(d) a company is connected with another person if that person has control of it or if that person and persons connected with him together have control of it
(e) any two or more persons acting together to secure or exercise control or a company shall be treated in relation to that company as connected with one another and with any person acting on the directions or any of them to secure or exercise control of the company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.