Taxation for Irish Companies: What Taxes Should Your Irish Ltd Pay

by | Business

tax rate in Ireland return

The Irish government is focused on attracting entrepreneurs and foreign companies from all over the world. In fact, Google, Twitter, and Amazon are already enjoying the perks of opening offices in Ireland including a favourable Irish taxation environment.

Every local company is liable to certain types of tax and it’s your responsibility as a business owner to ensure that your business is tax compliant. This guide explains the most common tax rates in Ireland that local businesses are liable to. Keep reading to learn more!

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Corporate Tax 

Corporate tax is a type of tax levied on a company’s profit. Irish-resident companies are taxable on their worldwide profits and gains while non-resident companies are only taxable on the trading profits of an Irish branch. 

Corporate tax rates in Ireland are among the most business-friendly in the entire European Union with only 12,5% tax rate for “active” traders. Passive income (e.g income from activities such as investments, dividends, income from rental property) is charged at the rate of 25%. 

Value Added Tax

Value added tax (VAT) is an indirect general consumption tax that applies to all commercial activities involving the production and distribution of goods and the provision of services whose 12-month gains surpass the following thresholds:

  • 75,000 Eur in case of persons supplying goods only;
  • 41,000 Eur for persons making ICA Intra community acquisition;
  • 37,500 Eur in case of persons supplying services only;
  • 10,000 Eur for making mail-order or Intra-community distance selling of goods and cross-border TBE (telecommunications, broadcasting & electronic) services into the state. 

VAT rates in Ireland are split into five groups: standard rate (23%), reduced rate (13.5%), second reduced rate (9%), livestock rate (4.8%), and flat-rate compensation percentage for farmers (5.5%).

PAYE

Employees in Ireland usually pay taxes through PAYE (Pay as You Earn) system. On behalf of the Revenue, the employer deducts Pay Related Social Insurance (PRSI) tax, Income tax, and UCS (Universal Social Charge) from their wages. The PAYE system is also applied to people who receive an occupational pension from a previous employer. 

Employees may be entitled to certain tax credits, tax reliefs, and exemptions in order to reduce the PAYE Irish tax rates. 

Another type of tax we’ll enlighten in this paragraph is UCS. USC is charged on your gross income before any consequent deductions are made. Total income for USC purposes includes such profits as 

  • employment income
  • dividend income
  • share option gains
  • taxable employer benefits
  • self-employed income
  • rental income

You cannot claim any tax reliefs, tax credits or exemptions on USC. Universal social charge tax rates in Ireland are calculated at a progressive rate ranging from 0.5% for the first 12,012 Eur per annum to 4.5% for income that exceeds 48,749 Eur.

Tax compliance in Ireland doesn’t only mean paying your tax liabilities but doing it in a timely manner. Check out the key tax payments and return filing deadlines for Irish businesses.

Income Tax

All individuals residing and domiciled in Ireland are entitled to income tax. This is a type of tax levied on both “passive” and “active” income of an individual who is either an employee or sole trader. Residents of Ireland are taxable on Irish income tax rates on their in-house and worldwide profit. Non-residents are only entitled to pay income tax on their Irish-source income. 

Personal income tax rates in Ireland are calculated at a progressive rate from 20% to 55%. It depends on a range of factors namely the income size, filing status, and the number of dependent children. 

In Budget 2023, the new increased standard income tax band was introduced. According to it,  the amount you can earn before you start being liable to higher tax income tax is €3,200.

Dividend Withholding Tax

Irish resident companies must withhold Dividend Withholding tax on dividend payments and other distributions they make. Dividends are paid to individuals by companies as a reward for owning the company’s shares. In the Irish taxation system, receiving dividends is classified as passive income. Thus, if you’re a resident of Ireland who receives dividends from an Irish-resident company, the tax rate would be 25%. 

Source: Unsplash

Wrapping Up on Tax Rates in Ireland

Tax rates in Ireland for businesses are one of major drivers for entrepreneurs looking for the most favourable environment for business incorporation. The most common spread types of Irish taxation for local traders are Corporate tax, Personal Income tax, Dividend Withholding tax, and PAYE system. Tax compliance is a must for business success and longevity. Make sure you’re keeping the pulse as the new changes in Irish taxation can be introduced by the Revenue. 

In case you’re looking for help with understanding and handling Irish taxation, don’t hesitate to contact us. Our accounting & bookkeeping department will make sure all Revenue requirements are met so you can focus on your core business activities.

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