Taxation in Ireland

Paying some form of tax is a certainty when operating a business in Ireland. Sole Traders and Limited Companies are legally required to pay tax.

There are four main taxes in Ireland: Corporation Tax/Income Tax, Value Added Tax (VAT) and Employers Taxes – Pay As You Earn (PAYE). 

All of these taxes apply to Irish limited companies depending on what activities your company carries out. Corporation Tax is a compulsory tax for all limited companies in Ireland. However, Sole Traders don’t register for Corporation Tax, only Income Tax.

Before you employ staff,  you need to register for Employers PAYE and there are certain criteria you need to meet before you apply for VAT registration. 

Having Premier Accounts Assist as your accountant from the start of your business journey will mean your business is set-up and registered for the correct tax. We will also file your correct tax returns at the end of the year. If you need help with your tax situation, please get in touch with a member of our team and we can talk you through the services you need to get your business off the ground.

You can call us on 045 909738 or email info@premieraccountsassist.ie. We’re here to help and happy to answer any questions you have!

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When do I need to register for tax? 

Limited Company: Once your company has been set up and you have received your company number, you are required to register for Corporation Tax with Revenue. Please note, you must submit an application to the Companies Registration Office (CRO) to incorporate your company before receiving a company number. The company number is needed to register your business for CT. 

Sole Trader: You are required to register for Self-Employed Tax with Revenue before your begin invoicing clients. Registering as self-employed also means you must register for Income Tax.

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Can I file my taxes?

Once you have received confirmation from Revenue that you are registered for tax in Ireland, there are different tax filings you need to prepare. This applies to both Limited Companies and Sole Traders.

Ireland’s tax system operates a self-assessment system. This means that each business owner is required to file their own tax returns to Revenue and keep these records for up to 6 years in case of an audit. 

Many business owners outsource accounting and bookkeeping requirements to accountants so they can be reassured that all their accounting and compliance obligations are correctly taken care of.

Failure to make the appropriate tax returns can have financial consequences for your business which can be worrying for a lot of Startups.

Below, we go through the different types of taxes in Ireland and let you know what to expect.

If you would like to talk to one of our team about your specific tax situation, get in touch with one of our experts now.

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Common taxes in Ireland

  • Income Tax/Corporate Tax Return

Companies resident in Ireland must pay CT on their profits. These profits include both income and capital gains. Likewise, Sole Traders must pay tax on their total income. 

  • Preliminary Tax

This is an estimate of tax due for the next tax year for Sole Traders & Limited Companies. As well as paying the tax you owe for the previous year, you are also required to pay preliminary tax for the upcoming year. And this is on top of the current tax liability.

  • Pay Related Social Insurance (PRSI)

PRSI is a payment made by your business and your employees. The value of this payment is based on the amount of your employee’s pay.

Employers pay ‘employer PRSI’ on top of any salary they pay employees. Employers PRSI is generally 11.05% of the salary of the employee. But this may vary depending on the employees’ PRSI class.

  • Directors Returns

Directors of Limited Companies are legally obliged to file a tax return each year. When a director takes a salary it is taxed at the source through payroll. They are still required to file a Directors Tax Return whether they decide to take money from the company or not.

  • Employers PAYE (Paye As Your Earn)

Businesses need to register for this tax if they are considering hiring staff to help in their business. If so, they need to register for Employer’s PAYE tax, pay Employer’s PRSI, and set up an efficient payroll system.

  • Universal Social Charge (USC)

Self-employed people are liable to pay USC if their gross income exceeds €13,000 in a year. Employers must calculate employee’s USC. 

  • Relevant Contracts Tax (RCT)

RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries. They must submit RCT returns to Revenue.

  • Value Added Tax (VAT)

As stated above, there are certain criteria to be met before your business can register for VAT. If your business is registered for VAT, you need to charge VAT on your invoices and submit VAT returns to Revenue.

Corporation Tax

The Corporation Tax in Ireland is 12.5% which is low when you compare it to other countries in the EU. Companies who incorporate and are centrally controlled and managed in Ireland can qualify for the 12.5% tax. The company must have activity in the state in order to be centrally controlled and managed in Ireland.

As previously mentioned, Sole Traders don’t pay Corporation Tax. Instead, they file their Income Tax returns at the end of the year. Corporation Tax is the tax on all profits after expenses in a company, whereas Sole Traders are required to pay Income Tax of up to 40% on their profits depending on their level of income. 

Corporation Tax Deadline

Once you have registered for Corporation Tax, you need to take note of your Corporation Tax deadline. In Ireland, your Corporation Tax return is due to be filed nine months after the end of the accounting period and before the 21st of that month.

All filings must be paid and filed electronically online through your company’s Revenue Online System (ROS). Need help preparing and filing your Corporation Tax / Income tax return? Contact us now. 

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What is Value Added Tax (VAT) and when should you file your returns?

VAT is a tax that is both mandatory for Limited Companies and Sole Traders. It is an additional payment added on to the value of goods and services at every stage of production or distribution. 

Once you complete VAT registration in Ireland, you are required to charge VAT on the products and services that you sell. You also need to file VAT returns, usually bi-monthly. 

Businesses selling products must register for VAT when they reach a turnover of €75,000 or above. Businesses selling services must register for VAT when they reach a turnover of €37,500. It is recommended to register for VAT when your business gets close to the above thresholds. 

Please note, a business may elect to register for VAT before reaching the above thresholds if they deal with a lot of suppliers and customers who charge VAT and want to claim back VAT. 

VAT can be a complicated topic because there are a lot of different rules and exceptions. For example, there are different VAT rates that apply to different industries.

Here at Premier Account Assist, we recommend you speak to an accountant if you have any questions about VAT registration or filing VAT returns in Ireland. Our team is always happy to talk you through our services so you can be assured you have expert support and guidance for your new business.

We also offer practical and advanced VAT courses developed by business professionals with 20 years industry experience.

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PAYE (Pay As You Earn)

If you would like to hire an employee for your business, you must register for employers PAYE tax. This applies to both Sole Traders and Limited Companies. 

You can register for PAYE with Revenue or outsource this to your accountant. You may consider outsourcing because when you employ staff, you are also required to run a payroll system and use Revenue’s PAYE modernisation system. 

As stated in our payroll guide, employers are required to:

  • Pay your employees’ wages or salaries. 
  • Calculate their benefits such as holiday pay, sick leave, insurance and retirement. 
  • Deduct taxes on behalf of the state government.
  • Pay all payroll taxes (Including some you owe as an employer)
  • Filing reports to show that you’re doing all these things correctly. 

Let us take care of your payroll while you work on growing your business. Get a quote now.

Preliminary Tax

Preliminary tax is your estimate of the Income Tax, PRSI & USC that you expect to pay for a tax year. Sole Traders must pay this by 31st October of the tax year in question. 

As well as paying the tax you owe for the previous year, you are also required to pay preliminary tax for the upcoming year. And this is on top of the current tax liability.

Small companies must pay their preliminary tax in one instalment if they have a CT liability of less than €200,000 in their previous accounting period. 

Preliminary tax can be a tricky subject, especially when you consider late payments will incur interest to be paid per day the deadline is missed. Having an accountant look after your tax returns is a good way to ensure that your tax returns are done properly.

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Our taxation services include:

  • Income Tax/Corporate Tax Return
  • Preliminary Tax Compliance
  • PAYE / PRSI Returns
  • Director’s Annual Income Tax Returns
  • Rental Accounts
  • VAT Returns
  • Relevant Contracts Tax Returns
  • VIES / Intrastat