There is a large body of law governing the area of taxation in Ireland. The principal legislation is contained in the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999, the Capital Acquisitions Tax Consolidation Act 2003 and the Value Added Tax Consolidation Act 2010.
These are revised annually through the Finance Act,
A company's liability to corporation tax in Ireland depends on its residency. Irish resident companies are liable to corporation tax on all their worldwide income and capital gains.
Companies not resident in Ireland but with an Irish branch are liable to corporation tax on firstly, profits connected with the business of that branch and secondly, any capital gains from the disposal of assets used for the purposes of the branch in the State.
The Irish tax system is a self-assessment regime, in which companies are obliged to determine whether or not they incur corporation tax and, if so, to file a tax return and make an appropriate tax payment.
Ireland has signed double taxation agreements with -68 countries of which - 60 are in effect. These agreements allow the elimination or mitigation of double taxation.
Companies pay corporation tax which is calculated on the company's profits including both income and chargeable gains. A company's income is calculated for tax on the basis of Income Tax rules and chargeable gains are calculated on the basis of Capital Gains Tax rules.
There are two rates of Corporation Tax:
- -12.5% for trading income unless the income is from an excepted trade in which case the rate is 25%
- 25% for non trading income (e.g. Investment income, rental income)
With some exceptions, Income Tax is chargeable on all income arising in the State to individuals, partnerships and unincorporated bodies
Current rates of income tax are a standard rate of 20% and a higher rate of 41%. An additional Universal Social Charge is also currently in force. The Universal Social Charge is a tax payable on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions.
There are various tax credits available to reduce an individual's tax bill.
The following rates of VAT apply in Ireland:
- The standard rate of VAT is 23% This applies to all goods and services that are not exempt or liable at the zero or either of the reduced rates;
- The first reduced rate of VAT - 13.5%. This applies to a range of goods and services including certain fuels, building services, repair, cleaning and maintenance services generally and certain photographic supplies;
- The second Reduced rate of VAT – 9% - applies to a range of goods and services related to the tourism and labour intensive industries, including hotel accommodation and restaurant services, admissions to entertainment facilities; certain printed matter including newspapers, periodicals and maps;
- Reduced rate of VAT - 4.8%. This applies to livestock, live greyhounds and hiring horses;
- Zero-rated goods and services. These include exports, certain food and drink, oral medicine, certain books;
- Exempted goods and services. These include certain financial and medical activities and educational activities.
You can claim for any business expenses, known as Revenue expenditure , incurred in your effort to make profits. These expenses are the day-to-day running costs and covers such items as:
- Wages, rent, rates, repairs, lighting and heating etc.;
- Running costs of vehicles or machinery used in the business;
- Lease payments on vehicles or machinery used in the business.
If your company is registered for VAT (value added tax), the expenses claimed should be exclusive of VAT.
As a general rule, you cannot claim for any private expenses, such as:
- your own wages, food, clothing (except protective clothing), income tax etc.;
- Business entertainment expenditure i.e. accommodation, food, drink or any other form of hospitality.
You cannot deduct capital expenditure when calculating the company's taxable profits, however you can claim what are known as capital allowances on certain expenditure.
Where expenditure relates to both business and private use, only that part which relates to the business will be allowed. Examples of such expenditure are rent, electricity, telephone charges, etc., where the premises involved are used partly for business and partly for private purposes.
These expenses will need to be apportioned to exclude the private use.
When starting in business you should advise the tax office by filling in the appropriate forms available from any Revenue office. You can register for any or all of the following:
- Corporation tax/Income Tax;
- Employer's PAYE (Pay As You Earn) / PRSI (Pay Related Social Insurance);
- Relevant contracts tax.
Shortly after registration, you may receive a visit or may request a visit from a revenue official to assist you in using the tax system and reply to any questions you may have on tax obligations.
Registering for VAT
You must register for VAT if your annual turnover (i.e. the amount of receipts excluding VAT) exceeds or is likely to exceed the following annual limits:
- €75,000 in respect of the supply of goods;
- €37,500 in respect of the supply of services.
You may also be obliged to register for VAT if you receive taxable services/goods from abroad or if you are a foreign trader doing business in Ireland.
To register for VAT, you must fill in certain forms which can be obtained by telephoning the Revenue forms & leaflets service on 1890 30 67 06 or contacting any revenue office.
The Pay As You Earn (PAYE) system is a method of tax deduction where an employer calculates and deducts income tax due each time wages, salary, etc. are paid to an employee. In addition, employers are obliged to calculate and deduct any liability for Pay Related Social Insurance (PRSI) and Universal Social Charge.
Employers must register for PAYE/PRSI if they pay:
- €8 per week (€36 a month) or more, to an employee who has only one job;
- €2 per week (€9 a month) or more, to an employee who has more than one job.
A company must register as an employer and operate PAYE/PRSI on the pay of directors even if there are no other employees.
You can also obtain the forms to register for PAYE/PRSI by telephoning the Revenue forms & leaflets service at 1890 30 67 06 or contacting any Revenue office. These forms can also be used to register for VAT. When you fill in the form and return it to the Revenue office, you will receive confirmation of your registration as an employer, a registered number for PAYE purposes and detailed information regarding the operation of PAYE/PRSI.
Submitting your tax declaration
Self-employed individuals and other businesses can submit their tax declarations through the Revenue Online Service (ROS) . Users can also use the service to calculate tax liability.
If you are involved in buying or selling goods within the EU, you will need more detailed information and should refer to the comprehensive Manual on VAT, available on the website of the Revenue service.