Ireland tax system: audit, reporting and optimization of taxation of Irish companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||12.5% for Trading Income, 25% - Non-trading income|
|Capital gains tax. Details||Capital gains In Ireland are taxed at 33%. Gains on the sale of substantial shareholdings in companies resident in EU member states or a tax treaty country are exempt if certain conditions are satisfied.|
|VAT. Details||The standard VAT rate is 23%. The reduced rates are 13.5% and 9%|
|Other taxes||real property tax, capital acquisition tax, social security contribution|
International tax agreement
|Albania, Armenia, Australia, Austria, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Hungary, Iceland, India, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kuwait, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Panama, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Viet nam, Zambia|
|Anguilla, Antigua and Barbuda, Argentina, Bahamas, The, Belize, Bermuda, Cayman Islands, Cook Islands, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liechtenstein, Marshall Islands, Montserrat, Saint Kitts and Nevis, Saint Lucia, Samoa, San Marino, Turks and Caicos Islands, Vanuatu, Virgin Islands, British|
Personal Income Tax
Personal income tax is levied on worldwide income and capital gains of residents and ordinarily residents, and Irish-source income and gains from immovable property of non-residents in Ireland. An individual is resident in Ireland if he/she spends more than six months of the tax year in Ireland, or has a combined presence of at least 280 days in Ireland over that tax year and the preceding tax year. An individual is considered “ordinarily resident” if he/she was resident in Ireland during the previous three tax years. Taxable income includes employment income, including most benefits. Since 1 January 2012, the standard tax rate is 20%, the higher rate is 41%. These tax rates apply as follows:
Capital gains tax at 33% is charged on gains derived from the disposal of assets. Tax year for individuals is a calendar year. Tax on employment income is withheld by the employer under the PAYE system and remitted to the tax authorities. The individual must file a tax return by 31 October in the year following the year of assessment and make a prepayment of at least 90% of the final tax due by 31 October in the year of assessment.
|20%||41% Individuals without dependent children||the first €32,800||balance Single or widowed persons with dependent children||the first €36,800||balance Married couples with one income||the first €41,800||balance Married couples both with income||€65,600||balance|
Corporate income tax is levied on worldwide income of resident companies and Irish-source income of nonresident companies. Corporate tax is imposed on a company’s profits, which consist of business/trading income, passive income and capital gains. Normal business expenses incurred in a trade may be deducted in computing taxable income. The corporation tax rate is 12.5% for trading income and 25% for nontrading income. Certain dividends from EU and tax treaty territories are taxed at the 12.5% rate.
Capital gains tax
Capital gains In Ireland are taxed at 33%. Gains on the sale of substantial shareholdings in companies resident in EU member states or a tax treaty country are exempt if certain conditions are satisfied.
Dividends received by an Irish-resident company from another Irish company are exempt from corporation tax. Dividends received from a foreign company are subject to corporation tax in the period the dividends are payable, but a credit for underlying corporate and withholding tax is generally available for foreign tax paid. Dividends received from a company resident in an EU member state may qualify for an enhanced credit up to the rate of tax on profits in that country.
Trading losses may be carried back to the immediately preceding period of equal length or carried forward indefinitely.
The tax accounting period normally coincides with a company’s financial accounting period, except where the latter period exceeds 12 months.
Irish VAT is levied on the sale of goods and provision of services. The standard VAT rate is 23%. The reduced rate of 13.5% is applicable to land and buildings (if taxable), building services, short term car hire, heating fuel, electricity, and waste disposal services. The reduced rate of 9% is applicable to сertain printed matter e.g. newspapers/periodicals, hotel/holiday accommodation, restaurant/ catering services, hairdressing services, cinemas, museums, art gallery exhibitions, certain musical performances, fairgrounds/amusement parks and facilities for taking part in sporting activities (eg golf green fees). Livestock and greyhounds and the hire of horses are taxed at a reduced rate of 4.8%, and exports, books, oral medicine, children’s clothing and footwear – at a rate of 0%.
The registration threshold for VAT purposes in Ireland is EUR 75,000 per annum where 90% of turnover is from the supply of goods, and EUR 37,500 in most other cases. If the goods themselves are not zero-rated, but are produced from zero-rated raw materials, the threshold is reduced to EUR 37,500 per annum. Nonresidents that make taxable supplies of goods or services in Ireland must register.
VAT tax period and returns
Persons obliged to register for VAT must submit periodic VAT returns, generally bi-monthly; in certain cases however, monthly, four monthly, bi-annual or annual returns may be submitted. Some accountable persons may elect to account for their VAT liability on the basis of cash received in a taxable period rather than on the basis of invoiced sales.
Dividends and interest paid to a nonresident are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty or exempt under the EU parent-subsidiary directive or the EU interest and royalties directive. The withholding tax is 20% on patent royalties. All other royalties are exempt. The rate may be reduced under a tax treaty or the payment may be exempt from withholding under the EU interest and royalties directive.
Stamp duty at rates of 1%-2% is levied on the transfer of property. The top rate of stamp duty for nonresidential property is 2%.
|Rate||1%||Transfer of certain stocks and shares 0%||Issue of shares 1%-2%||Transfer of property other than stocks and shares 1%-2%||Premiums on leases of houses, land and other real property 1%-12%||Average annual rent reserved by lease (rate depends on the length of the lease)|
There is an annual return fee in Ireland. For annual returns sent on paper, the filing fees amount to € 40 euro, while for returns that are filed electronically, the fee is €20 euro.
Other taxes and duties
|Real property tax||levied by the municipal authorities on the occupation of commercial real property (which are deductible in calculating corporation tax liability). Residential real estate is subject to an annual tax at 0.18% on values up to EUR 1 million and at 0.25% on values over EUR 1 million. Capital acquisition tax||comprises principally gift and inheritance tax. Tax rate is 33%. Social security||employers are required to make pay-related social insurance (PRSI) contributions by deducting up to 10.75% from the salary of employees.|
Transfer pricing: The arm’s length principle should generally be observed, although there are specific transactions, such as interest-free loans, that are recognized and continue to be available in certain situations. Thin capitalization: There is no specific thin capitalization legislation, but interest paid by a non-trading company to a nonresident non-treaty parent company that owns at least 75% of the Irish payer is generally reclassified as a dividend. Controlled foreign companies: No Disclosure requirements: No
Double Tax Agreements
Ireland has entered a whole range of double tax and tax information exchange mechanisms:
- 73 DTCs: Albania, Armenia, Australia, Austria, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Hungary, Iceland, India, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kuwait, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Panama, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Viet nam, Zambia. 27 TIEAs: Anguilla, Antigua and Barbuda, Argentina, Bahamas, The, Belize, Bermuda, Cayman Islands, Cook Islands, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liechtenstein, Marshall Islands, Montserrat, Saint Kitts and Nevis, Saint Lucia, Samoa, San Marino, Turks and Caicos Islands, Vanuatu, Virgin Islands, British.
Foreign exchange control
There is no exchange control in Ireland. No restrictions are imposed on the import or export of capital. Repatriation payments may be made in any currency. Both residents and nonresidents may hold bank accounts in any currency.
Every company is required to maintain proper books of account. The company must keep books of account for at least 6 years.
Companies are also required to disclose details of their accounts at the Annual General Meeting (AGM) and to attach a copy of those accounts to the annual return filed with the CRO. The Companies Acts 1963-2013 require directors of all companies to lay the following accounts and reports before the company members at the AGM:
- a profit and loss account (or an income and expenditure account if the company is not trading for profit) a balance sheet a directors' report an auditor's report
Irish companies are obliged to audit their accounts. However, small companies may be exempt from audit if thee meet two of the following conditions:
- Balance sheet total not exceeding €4.4 m Turnover not exceeding €8.8 m Employees not exceeding 50
Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
- Incorporation information (registration date, registered address); Information about directors and their resignation; Information about secretaries and their resignation; Information about registered capital, nominal value of shares and amount of issued shares; Information about shareholders and share transfer.
- Prosecution: The CRO prosecutes companies and their directors for failure to file annual returns on time. Companies and directors may receive a conviction in respect of each year that annual returns are outstanding. On conviction in the District Court, the penalty can be up to €1,900 for each offence. A director with three such convictions may be disqualified from acting as a director or having any involvement in the management of any company. Court injunction: Where a notice calling upon a director to comply with a statutory provision under the Companies Acts has been served on him/her and 14 days have elapsed since the date of service, application may be made to the High Court by the Registrar of Companies or the Director of Corporate Enforcement (“the Director”) for an order directing compliance by a defaulting director with the statutory provision in question within such period as the court may specify. Strike off: Any company which does not file its annual return in respect of any one year is liable to be struck off the register and dissolved.
The tax return of a company is due within 9 months of the year-end of the company, but not later than the 21st day of the 9th month after the company’s year-end. The corporation tax, if any, will be payable in up to three instalments. If the company is a small company (i.e. if its previous year’s tax liability is under €200,000) the company is obliged to pay preliminary corporation tax one month (but not later than the 21st day of that month) before the end of the accounting period, amounting to 100% of the prior years corresponding tax liability or 90% of the current years liability, if the company so wish’s. The balance of tax payable, if any, is payable when the return is being filed. For start up companies no preliminary tax is payable if the companies taxable profits for its first year trading are less than €200,000. The total tax liability for the accounting period will be payable on the filing of the company’s corporation tax return.
Taxes of Ireland
|Min. rate for corporate tax||12,5%/25%|
|Capital gains tax||33%|