Employee commuting is becoming an increasingly important focus of corporate sustainability strategies. Ireland has committed to reducing greenhouse gas emissions by 51% by 2030, with the transport sector required to achieve a 50% reduction in emissions over the same period. For many organisations, employee commuting also forms part of their Scope 3 emissions profile, making sustainable travel initiatives an important component of broader decarbonisation plans.
To support the transition to more sustainable methods of commuting, the Irish government has introduced a range of incentives designed to encourage Irish businesses, and their employees, to replace conventional company vehicles with electric vehicles (EVs), cycle to work and to use public transport. These tax incentives help employers reduce the cost of investing in sustainable transport while supporting employee savings and environmental goals.
Electric Vehicles and Tax Reliefs
The transition to EVs remains a central pillar of Ireland's strategy to reduce transport related emissions. To encourage this use of EVs, the tax system provides a number of incentives that make EVs more attractive for both employers and employees.
Benefit in Kind on EVs
Ordinarily, where company cars are available for private use by employees, a taxable benefit in kind (BIK) arises for the employee on which they are liable to payroll taxes. The taxable value of this BIK is calculated by reference to the original market value (OMV) of the car, its emissions category and the amount of business mileage undertaken annually by the employee.
To encourage the roll out of EVs by Irish businesses, special rules were introduced for calculating the taxable BIK of providing them to employees. These rules allow a ‘specified deduction’ to be applied to the OMV of a qualifying EV before calculating the taxable value of the BIK for the relevant employee. This can result in significantly lower payroll tax costs for employees using employer-provided EVs.
This relief has been extended until the end of 2027. However, the level of this relief is being phased down over time. In 2025, the specified deduction against the OMV of a qualifying EV was up to €35,000, this will decrease to €20,000 in 2026 and will be limited to €10,000 in 2027. While the relief may be gradually tapering off, it continues to provide a meaningful tax advantage relative to petrol and diesel vehicles, supporting the Government's objective of accelerating the transition to lower emission transport.
In addition to the favourable treatment afforded to employer provided EVs, a separate exemption applies to workplace charging facilities. Revenue guidance confirms that no BIK charge arises where employees use EV charging points provided on their employer's business premises. As a result, employers can invest in workplace charging infrastructure and support the electrification of employee commuting without creating an additional tax liability for employees.
From an employer perspective, by reducing the after-tax cost of providing EVs and supporting charging infrastructure, the tax regime helps employers encourage lower carbon commuting choices while contributing towards corporate emissions reduction targets and broader climate commitments.
Accelerated Capital Allowances
Employers investing in greener transport solutions may also benefit from the Accelerated Capital Allowances (ACA) regime. Under the ACA scheme, subject to certain conditions being met, businesses can claim a 100% accelerated capital allowance in the year of purchase for qualifying EV up to a maximum of €24,000.
For businesses investing in qualifying EVs for employees, the ACA regime can improve cash flow and reduce the after-tax cost of transitioning towards a more sustainable fleet.
Corporation Tax and VAT
While sustainable commuting initiatives are often discussed from an employee tax perspective, businesses should not overlook the potential corporation tax and VAT implications.
From a corporation tax perspective, expenditure incurred by employers on sustainable commuting initiatives will generally be deductible where incurred wholly and exclusively for the purposes of the trade. This may include expenditure on travel pass programmes, bicycle storage facilities, shower facilities, EV charging infrastructure and other measures designed to support employees in adopting lower carbon commuting options.
As employers increasingly invest in EV charging infrastructure, VAT recovery becomes an important consideration. Subject to the normal deductibility rules, VAT incurred on the acquisition, installation and maintenance of workplace charging facilities may be recoverable where the infrastructure is used for the purposes of a taxable business.
Additionally, the continued application of the 9% VAT rate to electricity also improves the economics of EV charging compared to conventional fuels, which generally remain subject to VAT at the standard rate. While VAT considerations will rarely drive investment decisions in isolation, they can influence the overall cost profile of a sustainable transport programme.
VRT Incentives
The Government has also supported EV uptake through Vehicle Registration Tax (VRT) reliefs. While EVs are not exempt from VRT, businesses can claim relief from VRT on the acquisition of new EVs (depending on the price paid).
These measures reduce the upfront cost of acquiring qualifying electric vehicles and complement the ongoing BIK advantages available during ownership. Together, the incentives create a more favourable tax environment throughout the lifecycle of an EV, from acquisition through to everyday use.
Cycle to Work Scheme
Apart from the increasing adoption of EVs, another method to incentivise sustainable transport is through the Cycle to Work Scheme. Under this scheme, employers can provide employees with bicycles and qualifying safety equipment without creating a taxable BIK, provided certain conditions are satisfied. The relief applies not only to traditional bicycles but also to qualifying electric bicycles, cargo bikes and e-cargo bikes.
The current tax-free limits are:
For employees, the scheme can significantly reduce the after-tax cost of acquiring a bicycle. For employers, the benefits extend beyond sustainability objectives, as employer PRSI does not arise on qualifying bicycles provided under the scheme.
In addition to reducing commuting emissions, cycling initiatives can also support employee wellbeing, improve physical health and help reduce congestion in urban areas.
Travel Pass Scheme
Public transport also plays a critical role in reducing transport related emissions. In this context, under the Travel Pass Scheme, employers can provide qualifying bus, rail and ferry travel passes without creating a taxable BIK for employees. This enables employees to access public transport at a reduced after-tax cost while encouraging a shift away from private car use. The scheme can operate through employer funded arrangements or approved salary sacrifice structures and can be used alongside the Cycle to Work Scheme, allowing employees to combine different sustainable travel options.
For employers, travel pass programmes can deliver tangible environmental benefits while supporting broader workforce objectives, particularly where organisations are seeking to reduce parking demand or promote hybrid working arrangements.
Conclusion
As Ireland continues its transition to a lower carbon economy, the tax system is playing an increasingly important role in encouraging more sustainable commuting choices. Measures such as the Cycle to Work Scheme, the Travel Pass Scheme, favourable BIK treatment for electric vehicles, VRT reliefs, accelerated capital allowances and potential VAT recovery opportunities can help reduce the cost of investing in greener transport solutions for both employers and employees.
However, the value of these initiatives extends beyond tax savings. For employers, sustainable commuting can support ESG objectives, contribute to emissions reduction targets and help address Scope 3 emissions, while also enhancing employee wellbeing, strengthening talent attraction and retention efforts, and reducing reliance on costly parking infrastructure. For employees, these measures provide greater access to environmentally friendly travel options in a tax efficient manner.
As sustainability considerations become increasingly integrated into business decision-making, sustainable commuting represents a practical area where tax policy, environmental objectives and workforce benefits align. By making full use of the available tax incentives, organisations can generate meaningful tax savings while supporting broader decarbonisation goals and creating long-term value for their business and employees.
For further information in relation to this topic, please contact Saumya Sadanand, Tax Advisor, Emma Hartnett, Tax Strategy Advisor, or any other member of the ALG Tax team.
Date published: 22 September 2026
