A Guide to Corporation Tax in Ireland

Corporation Tax is a tax on companies with profits, income or gains through an Irish-incorporated company or a foreign-incorporated company trading in Ireland through a branch or an agency.

1) Irish incorporated company resident in the state 

When determining if your company should be taxed in Ireland, you must determine where it is owned, managed, and controlled. Here are some questions to help you think about the tax residency of your company:

•  Is 50% or more of the ownership of the company resident in Ireland?
• Do the directors make the critical strategic and policy decisions pertinent to the company’s business in Ireland? Directors should make decisions relating to financing, investments, expansion of the company’s business, and entering any material contracts should be made in Ireland. 
• Are all meetings of the board of directors held in Ireland? 

2) A foreign-incorporated company trading in Ireland through a branch

When a foreign-incorporated company has a branch, office, factory, or site for a construction project that lasts more than six months, this could lead to a Permanent Establishment and result in liability to Irish Corporation Tax. 

In this situation, we recommend you discuss your situation in more detail with a professional accountant. Contact our team for a consultation on our accounting and tax services. 

Corporation Tax in Ireland is calculated based on profits. 

Below is a simplified explanation of the calculation;

1. Determine your net profit: Start with the company’s total sales revenue for the year and deduct allowable business expenses. To minimise the net profit, consider all costs associated with running the business. The key here is to ensure any expenses deducted are in the company name – any other costs could be challenged by the Revenue Commissioners. 
2. Capital allowances: does your company have any assets it uses during its business, i.e. computers, office equipment, machinery or commercial vehicles? The costs of these assets can be written off over an eight-year period (12.5% per annum) to reduce your net profit and arrive at your taxable profit.  

The company’s taxable profits will then be subject to a 12.5% or 25% tax rate. Ireland’s standard corporation tax rate is 12.5%, applied to trading or ‘active’ income. The 25% tax rate is for non-trading or ‘passive’ income—for example, income you receive from rental properties or investments. 

Working with a professional accountant means they will expertly handle these calculations for you. If you are considering hiring a professional, contact us today, and we’re happy to help.

The Corporation Tax Return (CT1) is due and payable on the 23rd day of the ninth month after the company’s accounting period ends. For example, if your company’s accounting period ends on 31 December, the Corporation Tax return and payment will be due on or before 23 September of the following year.

An accounting period is usually 12 months long. A company must file an additional Corporation Tax return if it runs an accounting period for more than 12 months. A company period end can vary from one company to another and depends on legal requirements, business preferences and operational needs. If you’re unsure, please contact us today to discuss how we can help.

Companies can use various reliefs and incentives to reduce their corporation tax liability. Some of the key reliefs are as follows;

1. Start-Up Entrepreneur Relief: New companies can avail of a relief that reduces their Corporation Tax for the first five years it trades. The relief is available up to Corporation Tax liability of €40,000. Partial relief is due if your Corporation Tax liability is between €40,000 and €60,000. It is linked to the amount of employer Pay Related Social Insurance (PRSI) you pay on employees’ salaries, up to a maximum of €5,000 per employee to a limit of €40,000 overall. 
2. Research and Development Tax Credits: Companies can claim tax relief equal to 25% of research and development expenditure, which can be offset against Corporation Tax liabilities. 
3. Knowledge Development Box Relief: A company which qualifies under this regime may be entitled to a 50% reduction on profits derived from qualifying intellectual property. This means qualifying profits would be taxed at an effective rate of 6.25%. 
4. Group relief: Companies within the same group can transfer losses to other group members to offset their tax liabilities.