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Ireland

Financial Year – 1 January – 31 December
Currency – Euro (EUR)

Corporate Tax Summary

Residence – A company is resident in Ireland if it is managed and controlled in Ireland or if it is Irish-incorporated.

Companies incorporated in Ireland from 1 January 2015 are deemed to be tax resident in Ireland. Companies incorporated before that date will be deemed to be resident in Ireland from 1 January 2021 (subject to some exceptions that may apply where there has been a change of ownership, which can result in the company being treated as resident in Ireland from the point of change of ownership).

However, the above incorporation-based residency rules will not apply where a company is regarded as tax resident in another country/territory under the provisions of a double taxation agreement – this usually comes down to where the company is effectively managed and controlled.

Basis of Taxation – Irish tax resident companies are liable to corporation tax on their worldwide income; non-tax residents are taxed on Irish source income only (see applicable rates below).

Corporation tax is imposed on a company’s tax adjusted profits, which may consist of business/trading income, passive income and capital gains. Business and trade related expenses incurred in a company’s trade may be deducted in computing taxable income.

Reference
Corporate Income Tax Rate (%)12.5%The corporation tax rate is 12.5% for trading income. Ireland remains committed to the lower rate of tax.

A higher corporation tax rate of 25% is levied on passive/non-trading income. This includes dividends from companies’ resident outside Ireland (with some exceptions), interest, rents, and royalties. This rate also applies to income from a business carried on wholly outside Ireland and to income from land dealing, mining, and petroleum extraction operations.

Dividends received by an Irish resident company from another Irish company are generally exempt from corporation tax – referred to as franked investment income.

Where dividends are received from EU/tax treaty countries, subject to certain conditions, these dividends can be taxed at the lower rate of 12.5%.

Royalty income earned by Irish companies is generally taxable at the rate of tax for passive income of 25%. However, where an Irish company is considered to be carrying on an IP trade, that company’s royalty and other similar income may be subjected to Irish tax at the lower corporation tax trading rate of 12.5%.

Close companies (companies controlled by 5 or fewer shareholders) may be subject to additional corporate taxes on undistributed investment income (including Irish dividends) and on undistributed income from professional services. Examples of professional services include professions such as solicitor, accountant, doctor, and engineer.

Capital gains are taxed at 33% (a higher rate of 40% arises on the disposal of certain foreign life assurance policies and units in offshore funds).

Where certain conditions are met, a company can avail of the participation exemption, whereby gains made on the disposal of shareholdings in companies resident in a EU member states/tax treaty country are exempt from tax.

Where a company generates income from patented inventions and copyrighted software (qualifying assets) and they relate to R&D undertaken by that company, the company can avail of the knowledge development box (KDB) and qualify for a tax rate of 6.25% on profits.

Branch Tax Rate (%)12.5%Irish branches of foreign companies are liable to corporation tax at the rates that apply to Irish resident companies. No tax is withheld on repatriation of branch profits to the head office.
Withholding Tax Rate:
Dividends – Franked0%Dividends paid to another Irish company are exempt from withholding tax.
Dividends – Unfranked25%Dividends paid to a non-resident company or an individual (whether resident or non-resident) are subject to a 25% withholding tax (increased from 20% from 1 January 2020), unless the rate is reduced under a tax treaty, or the dividends are exempt from withholding tax under the EU parent-subsidiary directive, or under a specific exemption under domestic legislation.
Dividends – Conduit Foreign IncomeN/A
Interest20%The withholding tax on annual interest paid to a non-resident is 20%, unless the rate is reduced under a tax treaty, or the interest is exempt from withholding under the EU interest and royalties directive, or under a specific exemption under domestic legislation.
Royalties from Intellectual Property20%The withholding tax rate is 20% on patent royalties. All other royalties are exempt. The rate may be reduced under a tax treaty, or the payment may be exempt from withholding under the EU interest and royalties directive, or under a specific exemption under domestic legislation.
Fund Payments from Managed Investment Trusts
Branch Remittance Tax0%No tax is withheld on repatriation of branch profits to the head office.
Net Operating Losses (Years)
Carry BackOne year
Carry ForwardIndefinite

Individual Tax Summary

Residence – An individual is resident in Ireland if he/she spends more than six months (183 days) of the tax year in Ireland, or has a combined presence of at least 280 days in Ireland over that tax year and the preceding tax year. An individual will be deemed ordinarily resident if he/she was resident in Ireland during the previous three tax years. A day is counted for residence purposes if the individual is present in the state at any time during the day.

Basis of Taxation – Where a person is considered Irish resident, they will be taxed on their worldwide income and capital gains, as are individuals who are not resident, but who are “ordinarily resident”, with some exceptions.

Non-residents are taxed on Irish source income and gains from immovable property in Ireland. The remittance basis of taxation may apply for some non-resident individuals. Income is taxed at progressive rates. Employment income, including most benefits, is taxable at the same tiered rates. Profits derived by an individual carrying on a trade or profession are generally computed and taxed in the same manner as profits derived by companies.

Filing Status – Married couples and civil partners living together may opt for joint or separate assessment.

Personal Income Tax Rates

Taxable IncomeTax Payable – ResidentsTax Payable – Non Residents
EUR 0 – 35,30020%20%
EUR 35,301 and above40%40%

Personal tax credits are available for resident individuals.

Non-residents are liable to Irish tax on Irish source income only (subject to DTA relief).

A universal social charge applies where the annual income exceeds EUR 13,000. The rate of the charge is 0.5% on gross income up to EUR 12,012; 2% on gross income between EUR 12,013 and EUR 19,874; 4.5% on gross income between EUR 19,875 and EUR 70,044; and 8% on gross income exceeding EUR 70,044. There is an additional 3% USC surcharge where an individual’s non-PAYE (Pay-As-You-Earn) income is more than EUR 100,000 a year.

Employed and self-employed individuals are required to make pay related social insurance (PRSI) contributions, with the amount based on the individual’s salary, usually at a rate of 4%.

Goods and Services Tax (GST)

RateThe standard VAT rate is 21%, with reduced rates of 0%, 4.8%, 9% and 13.5%.
Taxable TransactionsVAT is chargeable on the supply of taxable goods and services in Ireland, on the importation of goods into Ireland and generally on the intra-community acquisition of goods from suppliers in other EU member states.
RegistrationThe registration thresholds for VAT are as follows; EUR 75,000 per annum where 90% of turnover is from the supply of goods. Otherwise, EUR 37,500 per annum applies. A EUR nil threshold applies to non-established traders that make taxable supplies of goods or services in Ireland and must register for VAT regardless.
Filing and PaymentVAT returns and payments generally are required to be filed every two months.

Other Taxes Payable

TaxReference
Payroll TaxEmployers are obliged to operate withholding payroll taxes on employment income paid to employees, with the amount based on salaries, wages and benefits paid to employees. Payroll taxes are payable in line with the individual rates outlined above.

Employed and self-employed individuals are required to make PRSI contributions, with the amount based on the individual’s salary, usually at a rate of 4%.

Employers are required to make PRSI contributions at a rate of up to 11.05% on employees’ salaries.

Stamp DutyStamp duty at the rate of 1% is levied on the transfer of property. The top rate of stamp duty for non-residential property is 7.5%.
Land TaxRates are levied on the occupation of commercial property by local authorities.

In addition, residential real estate is subject to an annual local property tax at a base rate of 0.18% (which can be adjusted by local authorities) on values up to EUR 1 million, and at 0.25% on values above. This is not tax deductible in calculating the corporation tax liability.

Capital Acquisition Tax – 33%

Capital Gains Tax – 33%

Last updated: 24.11.2020