Running a business in Ireland and trying to work out what tax you actually owe? The amount of tax a business pays depends on how you are set up, what you sell, who you employ, and where your profits come from. This guide walks you through the main business taxes in Ireland and the tax obligations that come with each one.
The tax you pay is driven by your legal structure first, your trading activity second, and your VAT position third.
What business taxes do you pay in Ireland?
The Irish tax system splits business obligations into a handful of clear buckets. You will likely deal with more than one, even as a very small operation.
- Profit taxes: Income Tax for sole traders and partners, or Corporation Tax on corporate income for Irish companies.
- Indirect taxes: Value Added Tax (VAT) on most goods and services sold in Ireland, once you cross the registration thresholds.
- Employment taxes: PAYE, USC and PRSI deducted from staff wages, plus employer PRSI paid on top.
- Capital and other taxes: Capital Gains Tax on the disposal of business assets, withholding tax on certain payments, dividend withholding tax on shareholder distributions.
What you pay tax on, and at what rate of tax, depends on your structure. A sole trader pays personal Income Tax on profits. A company pays Corporation Tax on its trading profits, then the owner pays personal tax separately on any salary or dividends.
How do you register your business for tax with Revenue?
Every Irish business has to be known to Revenue before it starts trading. You register through the Revenue Online Service (ROS), which becomes your home for filing returns and paying tax due. New companies registered with the CRO are usually flagged to Revenue automatically, but you still need to activate the right taxheads for tax purposes.
- Income Tax under self-assessment for sole traders and partners.
- Corporation Tax for limited companies that are incorporated in Ireland or otherwise tax resident in Ireland.
- VAT if you expect to exceed the registration thresholds, or you want to reclaim VAT on costs.
- Employer PAYE if you are hiring staff, even just one part-time employee.
You will be issued a Tax Reference Number for each taxhead. A Tax Clearance Certificate, which proves your business is tax compliant, is a separate piece of paperwork you can request once your returns and payments are up to date.
How much tax does a sole trader pay in Ireland?
If you are self-employed, your business profits are taxed as part of your personal income. You and the business are the same legal person, and you file a Form 11 every year through ROS under self-assessment.
You pay three things on your trading profits:
- Income Tax: 20% on income up to the standard rate cut-off point, then 40% on the balance, with personal credits reducing the bill.
- Universal Social Charge (USC): a tiered charge that applies to almost all income above a small floor.
- PRSI: Class S contributions for the self-employed, which build entitlement to the State pension and certain benefits.
You also pay Preliminary Tax for the current year alongside the balance for the previous year. This catches a lot of new sole traders off guard in their second year of trading, because you effectively pay close to two years of tax in one go.
How are partnerships taxed in Ireland?
A partnership is not a separate taxable entity. The partnership files a partnership tax return showing the total profit, and each partner is then taxed individually on their share. So if two equal partners make a profit of EUR 80,000, each one is taxed personally on EUR 40,000.
Each partner pays Income Tax, USC and PRSI on their share, exactly like a sole trader. The amount of tax owed depends on each partner's wider circumstances. Drawings are not the same as taxable profit; you are taxed on your share whether you take it out or leave it in.
How much Corporation Tax do companies pay in Ireland?
Irish companies pay Corporation Tax on worldwide profits if they are resident in Ireland, or on Irish-source profits if they have a branch or agency in Ireland but are resident outside Ireland. The rules are set out in the Taxes Consolidation Act 1997 and updated each year in Finance Acts.
The Irish corporate income tax rates that most SMEs care about are:
- 12.5% on active trading income. Limited companies that trade actively pay tax at 12.5% on those corporate profits.
- 25% on non-trading or passive income, such as rental income, investment income and certain foreign dividends.
- 33% on chargeable capital gains, applied through the Corporation Tax return.
- 15% minimum tax under the OECD Pillar Two rules, which applies only to very large groups with annual revenue above EUR 750 million.
For most SMEs the headline number is the low corporate tax rate of 12.5% on trading. That is what makes Irish corporation tax so widely discussed internationally, and why the standard corporate tax rate attracts attention from international tax commentators. The domestic top-up tax that sits alongside Pillar Two will not touch a typical owner-managed company.
Comparison of the main business taxes in Ireland
|
Tax |
Who pays it |
Headline rate |
Filing frequency |
|
Income Tax (self-assessment) |
Sole traders and partners |
20% and 40% bands, plus USC and PRSI |
Annual (Form 11) |
|
Corporation Tax (trading) |
Active Irish companies |
12.5% on trading profits |
Annual (CT1) |
|
Corporation Tax (non-trading) |
Companies with passive income |
25% on rental and investment income |
Annual (CT1) |
|
VAT |
VAT-registered businesses |
Standard 23%, reduced 13.5%, 9%, 0% |
Usually bi-monthly |
|
PAYE / PRSI / USC |
Employers operating payroll |
Varies by employee income |
Real-time through PAYE Modernisation |
|
Capital Gains Tax |
Sellers of business assets |
33% on most gains |
Twice yearly |
When do you need to charge VAT in Ireland?
VAT is the indirect tax bolted onto most goods and services sold in Ireland. You collect VAT, reclaim VAT on business costs, and pay the net to Revenue. The standard rate is 23%, with reduced rates of 13.5% and 9% for sectors such as hospitality, construction and hairdressing.
You must register for VAT once turnover exceeds the relevant threshold (EUR 42,500 for services, EUR 85,000 for goods). Below that you can register voluntarily, which can make sense if your customers are themselves VAT-registered or if you have significant upfront costs to reclaim. Returns are usually filed every two months through ROS.
What payroll taxes do you handle if you hire employees?
Once you take on staff, you operate PAYE in real time. Every payslip is reported to Revenue on or before payday under PAYE Modernisation. You deduct employee Income Tax, USC and Class A PRSI, then pay employer PRSI on top of the gross wage.
Directors of owner-managed companies are usually paid through the same payroll. The split between salary and dividends matters because each carries different tax obligations. Get this wrong and you fall foul of the tax laws around proprietary directors.
How do you file and pay business taxes in Ireland?
Filing and paying tax in Ireland mostly happens through ROS. Key deadlines are 31 October for sole traders and partners (with an extension to mid-November if you pay and file online), nine months after year-end for Corporation Tax, and bi-monthly for VAT. Payroll is reported every pay run.
Miss a deadline and Revenue charges interest, surcharges and, in serious cases, penalties. A 10% surcharge on a late Corporation Tax return can wipe out a decent chunk of your profit.
How do you reduce your tax bill legitimately?
Plenty of tax incentives sit inside the Irish tax code if you know where to look. Capital allowances on equipment, the Employment Investment Incentive, the SURE scheme, the Research and Development tax credit, and the Section 486C three-year corporation tax relief for new trading companies are all worth investigating. So is making sure you claim for any business expenses you incur.
Tax relief is not a freebie; each scheme has conditions and paperwork. Used well, these reliefs can meaningfully cut your tax liabilities without straying anywhere near aggressive planning.
Frequently asked questions
What is the business tax rate in Ireland?
There is no single business tax rate. A limited company pays 12.5% Corporation Tax on trading profits and 25% on non-trading income. A sole trader pays Income Tax at 20% and 40%, plus USC and PRSI. VAT, payroll taxes and CGT sit on top depending on what you do.
Do limited companies pay 12.5% tax in Ireland?
Yes, where the company is actively trading. The 12.5% rate applies to trading profits of Irish companies. Passive income, rental income and most foreign dividends are taxed at 25%, capital gains at 33%. Very large multinational groups may also fall under the 15% Pillar Two minimum effective tax rate.
What taxes do I pay if I am self-employed in Ireland?
You pay Income Tax, USC and Class S PRSI on trading profits through annual self-assessment. If your turnover crosses the VAT thresholds you also charge and remit VAT. If you employ staff, you handle PAYE and employer PRSI through payroll.
What records should I keep as a business owner?
Keep sales invoices, purchase receipts, bank statements, payroll records, VAT records and mileage logs for at least six years. Separate personal and business spending from day one. Clean records make every tax return faster and any Revenue audit far less stressful.
Want help getting your Irish business tax right?
If you would rather spend your time running the business than wrestling with Revenue, we can help. First Accounts handles bookkeeping, VAT, payroll and tax returns for ambitious Irish companies and sole traders. Get in touch today.
Disclaimer: This guide is for general information purposes only and does not constitute tax advice. Tax rules and thresholds can change. Always consult a qualified accountant or tax adviser for advice specific to your circumstances.