Business Taxes in Ireland

We’ve written this blog post for new business owners in Ireland who aren’t sure about their tax obligations after they set up shop.

Does tax frighten you? Does it make you want to run a million miles away? Well it shouldn’t, and I’m going to show you why!

In this post, I’m going to give a quick overview of the main taxes you should know about if you are running a business in Ireland – everything from registration to filing returns.

[TL;DR] – Watch the video below ↓ and subscribe to our channel for more great business tips.

https://www.youtube.com/watch?v=8WKisnhrc0M&t=71s

The only difference between Income Tax and Corporation Tax is that Income Tax is for Sole Trades while CT is for companies.

You only really need to be concerned with VAT if certain thresholds have been met, and also you shouldn’t worry about Employment Taxes unless you are employing staff in your business (or if your company pays you a salary).

So let’s get started….

When should you register for tax?

CORPORATION TAX
After you incorporate your company with the CRO, you will get an official 6-digit Company Number and you’ll be able to invoice your customers. Around the time of incorporation, you should also register for Corporation Taxes with the Revenue Commissioners, and this can be done by going to www.ros.ie. As a company director you will also need to register yourself on ROS for income taxes.

INCOME TAX
If you’re a Sole Trader, you won’t need to register with the CRO (unless you are registering a business name), but you will need to register yourself with the Revenue Commissioners on www.ros.ie as well (using your own PPS number) for Income Taxes.

VAT
VAT registration is mandatory for all businesses if certain conditions are met – namely, if you sell more than €37,500 in services or €75,000 in products over a 12 month rolling period. Once you breach this threshold, you must register for VAT, complete VAT filings and also charge VAT on all sales. If you haven’t breached these thresholds, you do not have to register for VAT – but you can choose to voluntarily register for VAT – but why would you do this?
Well, for one you would be able to get a refund for VAT paid on expenses (assuming you have no sales which offset this). It is also beneficial from a sales point of view as your customers will be able to claim VAT back from your sales (assuming they are also VAT-registered businesses).
It’s important to note, that depending on the goods or services that you are selling, different VAT rates will apply, and I’ve put a link in the description below where you can find these VAT rates.

EMPLOYERS
You’ll need to register for employer PAYE before you make your first hire. You can register for this on ROS yourself or ask your accountant or payroll provider to do it on your behalf.

Be careful though – if you are doing payroll yourself, you will need payroll software which uses RC’s PAYE modernisation system (since 1 January 2019).

What are my reporting obligations?

CORPORATION TAX
Once you or your company is registered for tax, you’ll need to be mindful of the filing deadline dates. As Ireland operates a self-assessment tax system, you are responsible for calculating, filing and paying your tax with the Revenue Commissioners. You’ll also need to keep accounting records for 6 years in case of a Revenue audit.

Failure to file or pay your taxes can result in fines and accrue interest. Calculating your company’s Corporation tax is quite a cumbersome and complex task which is why many businesses choose to hire accountants to look after this for them.

Fines can range between 5-10% of the tax owed PLUS interest at a rate of 8% per year! So, you know, you should probably hire an accountant!

In Ireland, companies pay 12.5% tax on taxable profits.

The Corporation Tax return has to be filed by the 23rd day of the 9th month after the financial YE date. What does this mean? Well, let’s say your year-end date is 31 December 2019 – that means you have to file the return on the 23rd day of the 9th month after that, which is 23rd September 2020. You must also pay the balance of tax due for 2019.

INCOME TAX
Once you are registered for tax, you’ll need to be mindful of the filing deadline dates. As Ireland operates a self-assessment tax system, you are responsible for calculating, filing and paying your tax with the Revenue Commissioners. You’ll also need to keep accounting records for 6 years in case of a Revenue audit.

Failure to file or pay your taxes can result in fines and accrue interest. Calculating your Income tax is quite a cumbersome and complex task which is why many businesses choose to hire accountants to look after this for them.

Fines can range between 5-10% of the tax owed PLUS interest at a rate of 8% per year! So, you know, you should probably hire an accountant!

In Ireland, Sole Traders can get taxed up to 40% of their profits!

The income tax return has to be filed by the 31st October after the year in which you are reporting on. What does this mean? Well, let’s say your year-end date is 31 December 2019 – that means you have to file the return by 31st October 2020.

VAT
In general, VAT returns are done for every 2 months and need to be filed online by the 23rd day after the last day of the VAT period you are reporting on. The form, called a VAT3, basically asks you how much VAT you collected from your customers through sales, and how much VAT you paid on your expenses. The difference is either paid to Revenue or refunded to you. But do check out my other VAT video in the description below on how to register for VAT and prepare your VAT returns.

EMPLOYER
You need to submit PSRs to Revenue each payroll period, 14 days after the end of the month.

When do I have to pay tax?

CORPORATION TAX
You also have to pay preliminary corporation tax each year. If you’re a small company (your tax bill is <€200k) you can choose to pay 100% of the previous accounting period actual liability (which you have just fully calculated) or 90% of the current accounting period estimated liability. It can’t be less than the lower of these two figures. Also, you must annualise the prior year if it was a short year.

When do you have to pay? You’re going to love this wording: 31 days before the end of the accounting period, and on the 23rd of that month!!

Confused? You should be! But let’s break that down – if you’re year end date is 31 December 2019, then take 31 days away and you’re at 30 November. The 23rd of this month is 23 November – et voila, the deadline is 23rd November 2019.

Good news for startup companies – if your corporation tax bill is less than €200k, you don’t have to pay preliminary tax in your first year of trade! Instead you do it when you file your first Corporation Tax Return.

INCOME TAX
For Sole Traders, it’s slightly different in that you have to also pay USC and PRSI on top of your Income Taxes, and you can choose to pay 105% of the preceding prior year accounting period actual liability, 100% of the previous accounting period actual liability (just calculated) or 90% of the current accounting period estimated liability.

VAT
You have to make the payment after you file or (latest) by the deadline date as above (23 days after the VAT period).

EMPLOYERS
As an employer you are required to collect your employee’s taxes on the government’s behalf and pay it on a quarterly or monthly basis. Please check out our payroll video in the description below for more information on employment taxes. You need to remit PAYE/PRSI/USC to the Revenue commissioners 14 days after the end of the month (23 days for ROS users who file and pay online).

Uh-oh. I may have filed late or made an error, help!

Talk to your accountant – or even better, talk to us!

So there you have it – hopefully, the whole tax thing is a little more clear and a little less scary to you. Of course, if you are still boggled by it or just want to make sure it is done right, book a free Discovery Call with us today.

Disclaimer: This guide is for informational purposes only and contains a general summary of taxes in Ireland and is not a complete or definitive statement of specific tax obligations that may arise. Specific accounting and tax advice should always be obtained where appropriate.

Warning: If you invest in this product you may lose some or all of the money you invest.
This marketing information has been provided for discussion purposes only. It is not advice and does not take into account the investment needs and objectives, financial position, risk attitude, liquidity needs, capital security needs and / or capacity for loss of any particular person. It should not be relied upon to make investment decisions.