The Irish tax authorities have tightened the requirements for registering Corporation Tax for Irish companies. It is now mandatory for proprietary directors of Irish Ltd to be registered for Income Tax, which includes submitting a Personal Public Service Number (PPSN) during Corporation Tax registration.
Previously, while this requirement existed, it was not strictly enforced. Many companies registered for Corporation Tax without ensuring their proprietary directors were registered for Income Tax. However, tax officials now require PPS Numbers for all proprietary directors before granting Corporation Tax registration.
Businesses must ensure all proprietary directors are registered for Income Tax at the time of Corporation Tax registration to avoid delays and potential penalties.
What is Income Tax and Corporation Tax
Corporation tax is a tax levied on the profits made by companies. Corporation tax applies to the following entities:
- All corporations established in the country (small, medium, and large)
- Corporations conducting business within the country
- Foreign enterprises with a permanent establishment in the country
- Corporations that are deemed residents for tax purposes within the country
There are two corporation tax rates – 12.5% for trading profits and 25% for income from an excepted trade within the meaning of Part 2 of the Taxes Consolidation Act or non-trading income such us rental and investment income.
Personal income tax is a certain amount of tax levied by the government against one’s income. The percentage a person pays depends on the income level and personal circumstances such as age marital status, kids, etc. If you are a single person, your income up to €42,000 is taxed at 20% tax rate.
This is called the standard rate of tax, and the amount applied to it is called the standard rate tax band. The rest of your income is taxed at a higher income tax rate of 40%.
What is PPSN
Your Personal Public Service Number is a unique identifier required for all interactions with government services in Ireland, including the Revenue. The PPSN is issued by the Department of Social Protection. There was always an opportunity for non-residents of Ireland to apply for PPSN if they required PPSN (to exchange their driving license, for employment, for study, etc.).
For non-residents the IPN was applied for CRO and RBO filings. The Identity Personal Number (IPN) is a unique number assigned to non-resident directors of Irish companies. Unlike the PPSN, the IPN does not grant access to social services, state benefits, or information within the country.
Who are Proprietary Directors
In the Republic of Ireland, proprietary directors are individuals who serve on a company’s board primarily due to their ownership stake. Specifically, these directors hold a significant shareholding, typically more than 15% of the shares, or possess the ability to influence control over the company, either directly or indirectly. They typically come into office upon appointment by major shareholders to represent their interests and have their voices heard during the deliberations of the board.
What Has Changed for Irish Ltd?
Due to new requirements from the Irish tax authorities, businesses with directors holding at least 15% of the company’s shares need to register a PPSN.
- For New Companies: If you are planning to register a new company and will own a minimum of 15% of the shares, it is essential to obtain a PPSN for yourself. This will be a mandatory requirement for registering for Corporation Tax.
- For Existing Companies: If you are a proprietary director of an existing company but only have IPN, you need to apply for PPSN. This is also necessary to ensure compliance with the new regulations.
In both cases, Chern & Co can assist you in obtaining a PPSN, ensuring a quick and hassle-free registration process. The necessity of obtaining a PPSN highlights the importance of adhering to tax regulations and may impact the future of your business in Ireland. This is why it is advisable not to delay in addressing these changes and contact us as soon as possible!
