Ireland Accounting & Tax

Corporation Tax

The standard corporation tax rate in Ireland for trading income is 12.5%. The rate for non trading income is 25%.

In order to benefit from the rate of 12.5%, the trading income has to be managed in Ireland.

A start up company that is not a service company or a company whose income is taxed at 25% can get a 3 year corporation tax exemption. The exemption is limited to €40,000 per annum. A marginal relief can be obtained if the charge is between €40,000 and €60,000. In practical terms, this means that a company that satisfies the conditions of a start-up company is tax exempt on its first €320,000 of taxable profit. The three year start up exemption was extended to new trades which commence in the years 2012, 2013 and 2014.

From 1 January 2011, the relief is linked to the amount of employer’s PRSI paid by a company, subject to a maximum of €5,000 per employee, and an overall limit of €40,000. The relief does not apply to trades carried on by associated companies.

Taxation on Capital Gains

A company is chargeable to corporation tax on its chargeable gains. The company determines the gain by deducting from the consideration the cost of acquisition of the asset and also taking into account the applicable indexation allowance.

VAT

The standard VAT rate is 23% (reduced rates 4.8%, 5.2%, 9%, 13.5%)

Annual turnover registration limits:-

  1. € 75,000 – Businesses which supply goods (where not less than 90% of the annual turnover is from the supply of goods);
  2. € 37,500 – Other businesses, including those supplying services
  3. €41,000 – Intra-Community acquisitions of goods for business purposes by a person in the State
  4. €37,500 – Distance sales of goods by a foreign trader to non-registered customers in the State
  5. NIL – Traders not established in the State but supplying goods and services in Ireland
  6. NIL – Receipt of services set out in the Fourth Schedule for business purposes by a person in the State

A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the appropriate thresholds above. However, they may opt to register for VAT.

Exempt activities: Financial, educational, medical, dental.

Activities taxed at 0%: Exports, food, books, children’s clothes

* As from 1 July 2011 until 31 December 2013, a reduced VAT rate of 9% is applicable on certain goods and services, mainly related to tourism. As from 1 January 2012, the reduced rate was extended to include admissions to ‘open farms’ (historic houses and gardens).

Tax Residence

A company that is incorporated in Ireland shall be regarded for tax purposes as resident there. If an Irish company is managed and controlled by an Irish resident director, the company may take advantage of the benefits available under Ireland’s double taxation treaty network.

Audit Exemptions

The conditions to be satisfied before a company will be able to claim the exemption from the requirement to have its accounts audited are set out below:-

  • Turnover of the company must not exceed € 8.8 million (applicable to financial years which end on or after 07/08/2012 otherwise €7.3 million);
  • Gross assets must not exceed € 4.4 million (applicable to financial years which end on or after 07/08/2012 otherwise €3.65 million);
  • Average number of employees not exceeding 50;
  • The company must not be a parent company or a subsidiary company;
  • The company must not come within one of 19 classes of companies listed in the Second Schedule of the 1999 Act;
  • The company’s annual return must be filed on time.

All the conditions must be satisfied in respect of the current financial year and also in the preceding financial year.

Statutory Obligations

Companies registered with the Company Registration Office (CRO) are required to file accounts with their annual return as per Section 7 of the Companies (Amendment) Act 1986. This includes both public and private limited companies. This means that the annual return and accounts must be delivered to the CRO by not later than 28 days after the company’s Annual Return Date, or where the return has been made up to an earlier date, within 28 days of that earlier date.

An Annual Return Date (ARD) of a company is the latest date to which an annual return must be made up. Every company in existence on 1 March 2002 was assigned its own ARD by law. New companies incorporated on or after 1 March 2002 have an ARD triggered by their date of incorporation.

A company must submit a corporation tax computation within nine months of the end of the accounting period to which the return relates. Under the ‘Pay & File’ system, a company must compute and pay preliminary tax by not later than the 21st day of the month preceding the end of the accounting period and pay any balance of tax due when lodging its return, i.e. within nine months of the end of the accounting period.