Registering for tax in Ireland
As a new entrepreneur, understanding Irish tax regulations for Sole Traders and Limited Companies is pivotal. While many taxes apply to both business structures, certain taxes, such as Corporation Tax, are exclusive to Limited Companies.
In this guide, we’ll walk you through the various types of taxes that businesses in Ireland are required to pay, and we’ll provide you with insights on how to register for each of these tax types.
It’s crucial to note that you won’t automatically be registered for any specific tax until you’ve submitted the necessary paperwork to the Revenue authorities.
Sole Traders and Limited Companies in Ireland must register and pay tax to the Irish Revenue Commissioners (Revenue) through the Revenue’s Online System (ROS).
The four main taxes to be aware of are the Corporate Tax for Limited Companies, Income Tax, Value Added Tax (VAT), and Employers Taxes – Pay As You Earn (PAYE). Specifically, VAT registration in Ireland is crucial for businesses reaching a certain sales threshold.
Tax registration in Ireland can be a long process, and it can be complicated if you don’t know what to expect or how to prepare. But don’t worry; this guide will take you through how to register for tax in Ireland and the filing obligations once you are registered.
If you need assistance with the tax registration process in Ireland to make it more manageable and streamlined, we’re here to support you, and you can contact us today for more information on how we can help.
Tax registration in Ireland - what tax to register for?
Corporation tax registration - Limited Companies
Limited Companies register for Corporation Tax through a Tax Registration Form (TR2) and must submit it to Revenue before they start trading or invoicing clients. Usually, new companies will outsource this task to an accountant to ensure tax registration is done correctly.
It’s good to note that your company number is not your tax number. Once you have successfully registered for tax, the Limited Company will be issued a separate tax number. (This is something to be aware of if you change from Sole Trader to Limited Company in Ireland).
Rates of Corporation Tax
Ireland has a relatively low Corporation Tax rate compared to other European countries. In most instances, companies in Ireland will pay this tax at 12.5%.
The low Corporation Tax rate applies to companies incorporated in Ireland and centrally controlled and managed in Ireland. This may mean they have activities in the state, hire employees (including directors) here, rent warehouses or office space, have invoices from suppliers or customers in Ireland, and make strategic decisions in Ireland.
Corporation Tax Return
Once you have set up your Limited Company with the CRO and registered for Corporation Tax, you need to keep note of your Corporation Tax Return deadline. All filings can be paid and filed electronically through your company’s ROS account.
In Ireland, your Corporation Tax return must be filed nine months after your company’s financial year-end. For instance, many of our clients have a year-end date in December, making their Corporation Tax Return due in September the following year. This is an important deadline for Limited Companies, which could lead to fines and penalties if missed.
You must know your accounting period and financial year-end and prepare to file this return before it falls due.
If you need clarification on your tax obligations after-tax registration in Ireland, consider outsourcing to an accountant who can handle your company’s statutory compliance requirements. This will give you the freedom to focus on other aspects of your business and peace of mind that you’re meeting all critical deadlines.
Income Tax
Sole Traders don’t pay Corporation Tax – the equivalent of Corporation Tax for Limited Companies is Income Tax. The advantage of setting up a Limited Company is that they generally only pay 12.5% Corporation Tax on their profits, whereas a Sole Trader will need to pay taxes of up to 55% on all their earnings. Please note that taxes apply to any money directors pay themselves with.
Sole Traders register for Income Tax when they register as self-employed with Revenue. They must pay Income Tax on all the profits after expenses and file an Income Tax return at the end of the year.
Tax registration in Ireland for Sole Traders is straightforward if you have existing access to Revenue’s myAccount or ROS. Your tax number will be the same as your Personal Public Access Number (PPSN).
Preliminary Tax
Businesses in Ireland file their tax returns on a self-assessment basis. There are different tax deadlines for Sole Traders and Limited Companies.
As well as paying the tax you owe for the previous year, you must also pay preliminary tax for the upcoming year. And this is on top of the current tax liability.
Preliminary tax can be tricky, especially considering that late payments incur interest. Having an accountant to look after your tax returns is an excellent way to ensure they are correctly done. Contact our Client Services Team to receive a quotation for accounting and compliance services.
Preliminary tax for Sole Traders
Preliminary tax estimates are your income tax, PRSI, and USC that you expect to pay for a tax year. There are different rules you can follow to calculate your preliminary tax as a Sole Trader:
– 90% of the tax due that year
– 100% of the tax due from last year
– 105% of the tax due for the tax year preceding the immediately previous tax year
Preliminary tax for Limited Companies
Preliminary tax for companies estimates the Corporation Tax due for the upcoming accounting period. Please note that startup companies don’t have to pay preliminary tax for their first accounting period if their Corporation Tax liability is less than €200,000 in their first year.
There are different rules you can follow to estimate your preliminary tax as a Limited Company:
– 100% of the Corporation Tax liability for the previous accounting period
– 90% of the Corporation Tax liability for the current period
Please note that the preliminary tax payment cannot be lower than any of these calculations.
Value Added Tax (VAT) Ireland
VAT registration in Ireland is mandatory and a voluntary tax for both Sole Traders and Limited Companies.
Firstly, VAT generally only becomes mandatory when your business reaches a turnover of €37,500 or above for the sale of services and €75,000 or above for the sale of goods over 12 months. From 1 January 2024, the current VAT registration thresholds will be increased from €37,500 to €40,000 for services and from €75,000 to €80,000 for goods.
This is a rolling 12 months, and not according to the calendar. In other words, at any stage your business gets close to these thresholds, you should register for VAT.
Secondly, a business may voluntarily choose to register for VAT in Ireland. In some instances, a business may choose to register for VAT because they deal with many suppliers and clients who are also VAT registered and, therefore, want to claim back the VAT paid.
Revenue sets out the VAT rates for your business’s services or goods to its customers. You can only charge VAT once you are VAT registered and claim back VAT through a VAT return, usually filed every two months.
It’s very common for Revenue to ask for proof that you require a VAT number as part of their tax registration process. Therefore, showing evidence of trade in Ireland is essential to be eligible for a VAT number. This can include invoices to suppliers or customers in Ireland.
VAT returns
In general, VAT returns are filed with Irish Revenue every two months, outlining the amount of VAT you have charged out to your customers and the amount of VAT you have been charged over that period.
There are two ways to file VAT returns:
- Paper filings are filed using a VAT3 form. The VAT3 form is sent to you by Revenue and must be sent back to the Collector-General on the date specified on the document. Generally, this must be completed by the 19th day of the taxable month.
- Electronic filings are filed using ROS, which must be completed by the 23rd day of the taxable month.
As you can see, it can be confusing to file VAT returns every two months for your business if you are unfamiliar with the requirements. Outsourcing your VAT obligations will give you peace of mind that your business has correctly filed its returns with Irish Revenue.
Employer taxes - Pay As You Earn (PAYE)
Before hiring your first employee, you must register for the employer’s PAYE tax. Sole Traders and Limited Companies must register for this tax if considering employing people. This includes directors who wish to pay themselves a salary from their Limited Company. You may be wondering: Can a sole trader have employees? The short answer is yes.
Register for PAYE on ROS or outsource this to a professional company. You may consider outsourcing because when you employ staff, you must run a payroll system and use Revenue’s online PAYE modernisation system.
As an employer, you must calculate all the appropriate taxes to deduct from your employee’s wages. You collect all this tax on behalf of the Collector-General in Revenue, and then you pay them this sum of tax quarterly or monthly.
Tax registration for new Irish Limited Companies
We understand that starting a business can be a daunting task, especially when it comes to tax matters. We want you to know that we are here to support you every step of the way. Our goal is to make tax registration in Ireland more manageable and streamlined for you. We are dedicated to helping you succeed in your business endeavors and we place your success as our top priority. Please don’t hesitate to reach out to us today to learn more about our services and how we can assist you in navigating the complex world of Irish taxation.
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.
