Corporation Tax

Corporation Tax is charged on all profits (income and gains), wherever arising, of companies resident in the State, with some exceptions, and non-resident companies who trade in the State through a branch or agency.

The tax is charged on the company’s profits which include both income and chargeable gains. A company’s income for tax purposes is calculated in accordance with Income Tax rules. Chargeable gains are calculated in accordance with Capital Gains Tax rules.

There are two rates of Corporation Tax:

  • 12.5% for trading income unless the income is from an excepted trade* in which case the rate is 25%
  • 25% for non-trading income (e.g. investment income, rental income)

* Excepted trades include certain land dealing activities, income from working minerals and petroleum activities

 

Paying Corporation Tax & Filing Obligations

The Self-Assessment system ‘Pay & File’ applies to companies. The obligations of a company with regard to paying Corporation Tax and filing its return are as follows:

  • Compute and pay its preliminary tax liability by the specified date (see below).
  • File its return of income (including audited accounts where applicable) within nine months of the end of the accounting period.
  • Pay any balance of tax due when lodging the return i.e. within nine months of the end of the accounting period, subject to the 21/23 day rule.

 

Preliminary Corporation Tax

 

  • Large companies (whose liability exceeds €200,000) – 90% of the company’s final liability for the accounting period.
  • Small companies (whose liability does not exceed €200,000 in the preceding chargeable period) can opt to pay 100% of the liability to corporation tax in the preceding period
  • New or Start-up companies with a liability of €200,000 or less do not have to pay preliminary tax and can pay their entire liability within 9 months of the company’s year end. See below for new arrangements for eligible companies.

Due dates:

 

  • Small companies – one instalment 31 days before the end of the accounting period, subject to the 21/23 day rule.
  • Large companies – two instalments:

o   1st instalment: in the 6th month of the accounting period and the amount payable will be 50% of the corporation tax liability for the preceding accounting period or 45% of the corporation tax liability for the current accounting period.

o   2nd instalment: 11th month of the accounting period and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.

  • Balance of Tax: within nine months of the end of the accounting period, subject to the 21/23 day rule.

 

3 Year Exemption – Eligible Companies

A special 0% rate of Corporation Tax is available for a company in the first 3 years of business if:

  • The company is “new” and incorporated in Ireland or an EEA State since 14th October 2008
  • It commences a qualifying trade (see below) in 2009-2011
  • Its corporation tax liabilities do not exceed €200,000
  • This scheme was extended in Budget 2012 to include companies that incorporate from 2012-2014

A qualifying trade does not include:

a)     A trade previously carried on by another person.  The trade must be a new business and not the transfer of an existing business or part of a business from a sole trader or previous company

b)     An excepted trade (subject to 25% tax).  Profits from non trading activities such as rental and investment income are taxed at 25% and do not qualify for the relief

c)     A trade carried on entirely outside Ireland and whose profits are subsequently taxed at 25%.

d)     A trade dealing in or developing land or exploration and extraction of natural resources

e)     A trade of a “service company” that would be subject to a professional companies profits surcharge as per S441 TCA.

f)      A trade in the fishery or aquaculture sectors

g)     A trade active in the primary production of agricultural products

h)     A trade active in the coal sector