Do I pay tax on grants I receive?
You will pay tax on grants you receive that are revenue-based (e.g. for employee salaries, but not on those that are capital-based (e.g. purchasing equipment). The tax treatment of grants which are received by traders depends on the nature of the grant involved.
Where a grant is of a capital nature it is not taken into account in arriving at trading profits but reduces the amount of expenditure which qualifies for capital allowances. Allowable costs for Capital Gains Tax purposes are also reduced by the amount of capital grants.
Grants of a revenue nature should be included when calculating trading profits. Where a payment is received which increases a trader’s income or reduces the trader’s revenue expenditure, it is normally of a revenue nature and accordingly is liable to income tax or corporation tax, as appropriate.
Employment grants and recruitment subsidies are of a revenue nature and accordingly are liable to income tax or corporation tax, unless specifically exempted by tax legislation.
The BTWEA is not a grant per se, but rather social welfare granted to those starting a new business to end their unemployment. You do not have to pay tax, PRSI or Universal Social Charge on the Back to Work Enterprise Allowance but you may have to pay tax, PRSI and Universal Social Charge on any income you get from self-employment.
The STEA is also not a grant, it is also social welfare granted to those starting a new business to end their unemployment. STEA is a taxable source of income – generally your credits and tax rate band will be decreased though, rather than tax charges being levied on you.
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