Category: Corporation Tax

The Knowledge Box Regime The Finance Act 2015 introduced a knowledge development box regime. A 6.25% tax rate applies to profits from qualifying assets earned by an Irish company carrying on a specified trade. The profits available are the proportion of the profits of the specified trade that the expenditure on qualifying assets bears to […]

Overview Companies are generally subject to corporation tax on their capital gains as well as their income. In contrast, individuals are subject separately to capital gains tax on capital gains and income tax in income. Trading losses of a company may be thereby offset against capital gains in the same period. The accounting period is […]

Exchange of Information The Finance Act 2014 provides enabling legislation in respect of the common reporting standard as evolved by OECD and G20 for automatic exchange of financial information by financial institutions.  Regulations may, in addition to providing for making returns of information in relation to reportable accounts, may outline the manner in which the […]

Entities Covered Corporation tax applies to companies and most other legal bodies, whether formed in Ireland or abroad. A foreign incorporated company may be subject to Irish Corporation Tax, if it is resident in Ireland. Formerly, a company incorporated in Ireland, could be outside of the scope of Irish corporation tax if it was managed […]

12.5% Rate Corporation tax represents a key element of  Irish industrial policy.  When Ireland joined the European Union it was allowed under transitional arrangements to retain export sales relief until 1980.  Thereafter, under state aid rules, it was permitted to apply a 10% corporation tax rate to manufacturing.  This was later extended to the IT […]

Interest In order for interest on a loan to qualify for relief, it must be used wholly and exclusively  for the purpose of the trade or  the purpose of property rental or acquiring trading or property rentals assets. A company qualifying for interest deduction must have a material interest in the company that uses the […]

Industrial Buildings Capital allowances are available in relation to the construction of an industrial building. An industrial building is a factory mill or similar premises. Parts of the building not so used are excluded including for example, offices showrooms and retail premises within an industrial building (if they exceed 10% of total cost). In the […]

Overview Capital allowances are available for companies in much the same way as for individuals.  As with individuals, depreciation is not directly allowed as a deduction. Depreciation is added back in calculating trading profits. Capital allowances are allowed over specified periods in respect of certain types of assets. They are not available in respect of […]

Basis of Charge As with income tax, corporation tax, taxes, profits and earnings in accordance with rules which apply to each of a number of types of income.  Corporation tax is charged on total income and capital gains. Broadly speaking, the rules applicable to trading income, professional services income, investment income, rental income and capital gains […]

Foreign income As is the case with income tax, corporate income from sources outside Ireland is taxed under a separate category to the various categories of domestic Irish income (trading, rental, investment, distributions; Schedule D Case III. Foreign source income may arise from a foreign trade or from foreign rental or investment income.  Income and […]

Basic Principles Accounts are almost always made up on a accruals basis. This is usually required by accounting standards. Income is calculated on the basis of income earned and expenses, incurred notwithstanding that the timing of the cash receipt and payment may differ. Expenditure must be referable to the accounting period concerned. Expenditure may be […]

Company Income As with income tax, corporation tax, taxes, profits and earnings in accordance with rules which apply to each of a number of types of income.  Broadly speaking, the rules applicable to trading income, professional services income, investment income, rental income and capital gains are identical to those applying to income tax and capital gains […]

Smaller Companies Preliminary Tax Start up companies enjoy certain benefits and concessions. If a company does not expect tax liability to exceed €200,000 in year one, it will have no preliminary tax obligation. The tax liability will be due with the corporation tax return, eight months and 21 days after the end of the accounting […]

Tax Returns The system of preliminary tax, tax returns and assessments for companies is broadly similar to that for individuals. An initial return is also required upon commencement to trade. Companies must self assess their tax liabilities. If they have any income profit or gains potentially within the scope of tax in that period, they […]

S. 110 Companies Section 110 companies were orginally used by financial institutions for the purpose of securitisation. See the separate sections on securitisation. The company must have at least €10M qualifying assets. It must be Irish resident and carry out no other activities, than holding and managing these assets. It must notify Revenue and furnish […]

Buyback and Redemption of Shares Formerly, there were severe restrictions on a company purchasing and redeeming its own shares. Tax and company legislation was introduced in 1990 to facilitate the purchase back or redemption by a company of its own shares. A redemption is where the company buys back and cancels the share without acquiring […]

Dividend withholding tax Where an Irish resident company makes a distribution to certain persons including in particular Irish resident individuals the company is obliged to withhold 25% tax and pay it to the Revenue Commissioners. It applies where the recipient would be subject to Irish income tax on dividend income. It applies to any distribution. […]

Dividend Income A dividend is usually declared by the directors and confirmed by the shareholders. Under companies law, it may only be declared out of earned profits. It is not deductible for tax as it is a distribution of profit out of the company to the shareholders. Generally companies must withhold dividend withholding tax on […]

Definition of Close Company The definition of a “close company” is designed to catch most companies, public and private, other than those with a genuinely wide dispersal of shareholders. The test is detailed and technical and it is very difficult to avoid being so classified. A close company for tax purposes is an Irish resident […]

Overview Tax rules limit the extent to which shareholders may use close companies in order to postpone, reduce or avoid personal tax liability.  Tax law defines certain companies to be “close companies”.  The vast majority of private companies and many non quoted public companies are deemed close companies. The effect of the definition is that […]

Groups Although each company in a group is a separate entity, tax law allows them to be treated as a unit for some taxation purposes. Losses and assets may be passed between group members on a tax neutral basis, subject to compliance with conditions. There are provisions which undo the benefit of exempt tax transfers, […]

Transfer of Losses Although each company in a group is a separate entity, tax law allows them to be treated as a unit for some taxation purposes. Losses and assets may be passed between group members on a tax neutral basis, subject to compliance with conditions. There are provisions which undo the benefit of exempt […]

General The rules for companies’ losses are broadly similar to those in respect of sole trader/partnerships. Losses may be set against total profits of the period or may be carried forward against profits of the same trade. They may be carried back against the profits of  a preceding accounting period of the same length .. […]

Charges are categories of expenditure that are treated differently (and often more favourably) than other expenditure that qualifies for allowances and deductions.  They are treated in the nature of the first call and are taken off the top of income. Charges relate principally to interest on certain types of bank loans. From a computational perspective, […]

Types of Loss There are two distinct rates of company taxation on income, namely 12.5% for almost all trading activity and 25% in relation to certain excepted trades and non-trading / passive income, such as rental and dividend income. Unsurprisingly, the rules in relation to losses require that losses incurred in “12.5%” tax rate trades(all […]