Tax Liabilities for Sole Traders
When you set up a Sole Trade in Ireland there are a number of taxes that you may become liable to paying. See below a list of taxes that you should be aware of before starting your Sole Trade.
Every year you will be required to file a tax return with Revenue on ROS.ie. This tax return is called a Form 11. In 2020, as a self-employed trader you can claim an Earned Income tax credit of €1,500 (however, if you also qualify for the PAYE tax credit, the combined value of these 2 tax credits cannot exceed €1,650). You can also get a Single Person Tax credit of €1,650. In Ireland, the standard tax rate band €35,300 (taxed at 20%, after that the tax rate is 40%). Theoretically this means that you could earn €15,750 before paying income tax. There are a number of expenses that can be claimed in order to reduce your tax liability.
Everyone (including Sole Traders) is liable to pay the Universal Social Charge (USC) if their gross income is over €13,000 in a year. An extra charge of 3% applies to any self-employed income over €100,000 regardless of age. This means that self-employed people pay a total of 11% USC on any income over €100,000.
PRSI Class S is paid by self-employed people such as: professional people (for example doctors, dentists, solicitors etc) sole traders, people in business on their own or in partnership, farmers, religious, contractors, sub-contractors, people with income from investments, rents or maintenance payments. If you earn less than €5,000 from self-employment in a year you are exempt from paying Class S PRSI (but you may pay €500 as a voluntary contributor).
If you employ staff you will need to register for employment taxes and also now act as a tax collector for the government. You will need to deduct PAYE, PRSI and USC from your staff’s wages and also pay employer PRSI (currently up to 11.05%) on top of the gross salary. This needs to be remitted to Revenue.
Relevant Contract 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. The rates of tax are 0%, 20% and 35%.
All businesses can be required to register for VAT if the surpass certain threshold limit on sales. You have to register, charge and remit VAT to Revenue if you surpass the following sales thresholds:
- Services – €37,500 in sales within a 12-month rolling period
- Goods – €75,000 in sales within a 12-month rolling period
Products related to this post:
Union VAT OSS Registration (in Ireland)€150.00
Union VAT MOSS Registration (in Ireland)€150.00
STARTER PACK: Irish Tax Registrations (for new companies)€450.00 – €1,050.00
non-Union VAT MOSS Registration (in Ireland)€300.00
Sole Trader/Company Director Income Tax Registration (with ROS)€150.00
VAT Registration (in Ireland)€150.00 – €300.00
Business Name Registration (in Ireland)€150.00