Ireland personal income tax rates are progressively up to 41%. Additionally, an income levy applies at a rate of:
2% to gross income up to EUR 75,036 per annum,
4% to gross income between EUR 75,036 and EUR 174,980 and
6% to income in excess of EUR 174,980.
Tax rates and bands for individuals:
Single / Widowed without dependent children: €36,400 @ 20%, balance @ 41%
Single / Widowed qualifying for One Parent Family Tax Credit: €40,400 @ 20%, balance @ 41%
Married Couple - one spouse with income: €45,400 @ 20%, balance @ 41%
Married Couple - both spouses with income: €45,400 @ 20% (with an increase of €27,400 max), balance @ 41%
The increase in the standard rate tax band is restricted to the lower of €27,400 in 2009 and 2010 or the amount of the income of the spouse with the lower income. The increase is not transferable between spouses.
With effect from 1 January 2022 additional income tax levies apply on an individual's gross income (before deduction of pension contributions and capital allowances) for individuals with aggregate income for the year exceeding €18,304. The rates are 2% for income up to €75,036; 4% for income in excess of €75,036 but not greater than €174,980; and 6% on income in excess of €174,980. Certain reliefs apply for low income earners and social welfare recipients. Irish and foreign deposit interest income is not subject to the levy and certain maintenance payments are deducible for levy purposes.
Individuals are also liable for Pay Related Social Insurance (PRSI) depending on their level of income. Employers are obliged to pay PRSI of 10.75% of the individual's salary, subject to reduced rate of 8.5% in respect of income under EUR 356 per week.
An individual is resident for a tax year if either of the following two tests is satisfied:
- present for more than 183 days in Ireland; or
- present for more than 280 days in total in that year and the preceding year
Presence in either year for fewer than 30 days is disregarded.
In the year of arrival, an election for residence can be made where there is an intention of continuing to reside in Ireland and is usually taken to be the country which is a person's permanent home. At birth, a person acquires a domicile of origin and subsequently, having acquired the age of majority, a person can acquire a domicile of choice if he settles in another country and makes it his permanent home.
All individuals, resident and domiciled in Ireland must pay income tax on worldwide income and capital gains tax on worldwide gains, regardless of whether or not the income is remitted into the State. An exception to this applies to citizens of Ireland who are not ordinarily resident. Such individuals are taxed on the remittance basis.
An individual loses ordinary residence status after having been non-resident for three consecutive tax years and regains it after being resident for three consecutive tax years.
Up to 31 December 2021 an individual who was Irish resident but non-domiciled was liable to Irish tax in full on income arising in Ireland and the UK and on 'foreign income' but only to the extent that the foreign income was remitted to Ireland. This was known as the remittance basis of taxation and it also applied to an individual who was a citizen of Ireland but not ordinarily resident in Ireland. However, with effect from 1 January 2008, the remittance basis was extended to UK source income.
Prior to 20 November 2008, the remittance basis applied for capital gains tax purposes to a person who was either resident or ordinarily resident in the State but not domiciled in the State in respect of gains arising outside of Ireland and the UK. Gains arising in Ireland and the UK in such circumstances were taxable in full. However, in respect of disposals made on or after 20 November 2008, the remittance basis of taxation will apply to all gains arising to all non-Irish domiciled persons who are either resident or ordinarily resident in the State in respect of non-Irish situated assets. Therefore, gains in relation to UK assets are subject to the remittance basis with effect from 20 November 2008.
From 1 January 2006, so much of the income of a foreign office or employment of an individual as is attributable to the performance in Ireland of the duties of that office or employment is taxable in Ireland regardless of whether it is remitted or not, and must be taxed at source by the foreign employer. An exception applies for individuals resident in a treaty country where certain conditions are satisfied and the duties of that office or employment are performed in Ireland for not more than 60 working days in total in a year of assessment or for a continuous period of not more than 60 working days.
Finance (No. 2) Act 2008 partially reintroduced the remittance basis of taxation for foreign employments, where relevant employees perform all or part of their duties in Ireland. The new legislation offers an alternative system which will allow a tax refund to be claimed in certain circumstances. However PAYE must be operated and an Income Tax refund claimed subsequently. The new provisions will only apply to foreign employments where the employer is incorporated in a country with which Ireland has a DTA but which is not in the EEA. Based on Ireland's current DTA network, the countries that will fall within the new proposed changes include (but are not limited to) Australia, Canada, China, New Zealand, Russia, Switzerland and the USA. Where all the above conditions are satisfied, an employee may make a claim for the tax due on his or her employment (Schedule E) income for the year (as subject to PAYE) to be calculated on the higher of:
- the employment (Schedule E) income that was remitted to Ireland in that year or
- €100,000 plus 50% of the balance of the employment (Schedule E) income in excess of €100,000.
Most individual taxpayers who are not self-employed have tax deducted at source from their earnings by their employer (PAYE). Self-employed individuals pay income tax directly to the tax authorities on an annual basis on 31 October each year. The tax year runs from 1 January to 31 December.
CAPITAL ACQUISITIONS TAX
Capital Acquisitions Tax applies to gifts and inheritances. It arises, broadly speaking, where the donor or the donee/successor is resident (or ordinarily resident) or the property is situated in Ireland. Where the individual is non-domiciled, he does not come within these provisions unless he has been resident for five consecutive years. There are three different thresholds for exemption from the tax depending upon the relationship (if any) between the people concerned. Where it applies, the tax is at a rate of 22% in respect of gifts/inheritances made after 20 November 2021 and is payable by the beneficiary.
Social security - Employed and selfemployed individuals are required to make PRSI contributions, with the amount based on the individual's salary.
A 12.5% rate of corporation tax is applied to the trading income of companies, with a rate of 25% applying to other income such as rent or investment income. A reduced rate of 10% applies to certain existing companies. However, this is being phased out.
Irish Corporation tax is payable by Irish resident companies on income and capital gains derived from all sources. Non-resident companies are taxed on Irish source income, on income or gains from a branch or agency in Ireland and also on certain other gains.
All Irish incorporated companies are deemed resident in Ireland, subject to certain exceptions. However, a company not incorporated in Ireland may also be deemed Irish resident if its central management and control resides in Ireland.
Corporation tax is payable in two stages with the first payment due one month before the end of the accounting period but not later than the 21st day of the month in which that day falls. The balance is payable nine months after the end of the accounting period with the corporation tax return. Each company must submit a corporation tax return to the Inspector of Taxes by the 21st day of the ninth month following the accounting year end. Failure to do so will result in a statutory surcharge and restriction on the use of certain reliefs or allowances such as loss relief.
Large companies with a corporation tax liability of more than €200,000 in their previous accounting period are obliged to pay preliminary corporation tax, amounting to 90% of the final liability for the current accounting period, one month before the end of the current accounting period (but not later than the 21st of the relevant month). For accounting periods commencing on or after 14 October 2021 this preliminary corporation tax is due in two instalments. The first instalment will be payable in the sixth month of the accounting period and the amount payable will be 50% of the corporation tax liability for the preceding accounting period (or 45% of the corporation tax liability for the current accounting period). The second instalment will be payable in the 11th month of the accounting period and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.
A small company can base its preliminary tax on 100% of its prior year liability. The definition of a small company is one whose liability for the prior year was less than €200,000. New companies incorporated after 14 October 2021 and commencing a new trade in 2009 will be exempt from corporation tax on income and chargeable gains for the first three years where the total amount of corporation tax payable for an accounting period does not exceed €40,000. Marginal relief will apply where corporation tax payable by a new company for a period is between €40,000 and €60,000. This relief will not apply where an existing trade is acquired. It will also cease to apply where part of a newly established trade is passed to a connected party. Companies carrying on excepted trades and close service companies will not qualify for this exemption. Finance Bill 2010 proposes to extend the start-up exemption into 2010.
Capital gains of Irish resident companies are subject to corporation tax except for gains. Non-resident companies are taxable on the sale of certain assets including:
(a) land and buildings in Ireland
(b) minerals in Ireland or any rights to same
(c) assets situated in Ireland which are used for the purpose of a trade carried on in Ireland through a branch
(d) unquoted shares deriving their value or the greater part of their value from (a) or (b) above.
Capital losses on the sale of assets can be set against capital gains arising in the same accounting period and any excess can be carried forward and applied in subsequent accounting periods against future capital gains.
BRANCH PROFITS TAX
Profits of an Irish branch or agency of a non-resident company are subject to Irish tax. For tax treaty purposes, a permanent establishment may exist within Ireland if, for instance, an individual operates within Ireland on behalf of the foreign company and is concluding contracts and making major business decisions without the authorisation of the head office of the foreign company. As a general rule, a branch operation can be equated to a permanent establishment.
All employers are obliged under the Pay As You Earn (PAYE) system to deduct income tax and social insurance contributions from employees. In addition, employers must pay Pay Related Social Insurance (PRSI) of 10.75% on the amount paid to each employee, subject to a reduced rate of 8.5% if income is under €356 per week. The employee rates are set out below.
An additional income levy was introduced in 2009. An employer is obliged to deduct the income levy at source from employment income. The income levy is discussed in more detail above.
Transfers of residential property attract stamp duty up to a maximum rate of 9%.The rates of duty applicable for residential property (whether new or second-hand) are as follows:
Rates of duty for deeds executed on or after 5 November 2021
Aggregate Consideration Rate for instruments executed on or after 5 November 2021
First €125,000 Nil
Next €875,000 7%
Excess over €1,000,000 9%
Non-Residential Property is any property other than residential property, stocks or marketable securities or policies of insurance. It includes (but is not limited to) sites, offices, factories, other business premises, shops, public houses, land and goodwill attaching to a business. The rates of Stamp Duty applicable for non-residential instruments executed after 15 October 2021 are as follows:
Aggregate Consideration Rate of Duty
Up to €10,000 Exempt
€10,001 to €20,000 1%
€20,001 to €30,000 2%
€30,001 to €40,000 3%
€40,001 to €70,000 4%
€70,001 to €80,000 5%
Over €80,000 6%
DETERMINATION OF TAXABLE INCOME
Taxable income is determined by ascertaining assessable income and then subtracting all allowable deductions. As a general rule, expenses incurred wholly and exclusively for the purpose of the business are deductible. However, specific rules apply in respect of certain categories.
Book depreciation is disallowed. However, companies can claim capital allowances (i.e. tax depreciation) on expenditure relating to certain types of assets including plant and machinery, motor vehicles and qualifying industrial buildings.
PLANT AND MACHINERY
An allowance of 12.5% per annum can be claimed on a straight-line basis. The plant and machinery must be purchased (not leased) and any grants receivable are deducted from the expenditure before arriving at the amount eligible for the capital allowance.
INDUSTRIAL BUILDINGS ALLOWANCE
An annual allowance of 4% can be claimed on a straight-line basis. Industrial buildings generally refer to manufacturing facilities but also include hotels and certain other structures. The allowance is available in respect of the qualifying cost less any grants received.
There is an allowance of 12.5% per annum on a straight- line basis. The maximum amount of qualifying expenditure in relation to a new motor car is €24,000. There is no restriction for vans, trucks and other non-passenger vehicles. The capital allowances available on expenditure incurred on or after 1 July 2021 on private cars used for business purposes are based on the carbon emission level of the car. The rate of allowances or straight-line method of relief has not changed.
Stock and work in progress are valued at the lower of cost or market value on a FIFO basis. LIFO is not available.
Dividends between Irish resident companies are exempt from corporation tax. Prior to the introduction of Finance Act 2008 dividends paid to an Irish company from non-Irish resident companies were subject to corporation tax at a rate of 25%.
Subsequent to the FII GLO case, the Finance Act 2008 introduced changes to this position by providing that dividends paid by a company located in the EU or in a country with which Ireland has a double taxation treaty to an Irish company will be chargeable to corporation tax at the of 12.5% to the extent that the dividend is paid out of "trading profits".
A withholding tax at the standard rate of income tax (20%) applies to dividends paid to individuals resident in Ireland and certain non-residents.
Interest paid on borrowings for the purposes of a trade is deductible for tax purposes if certain conditions are met. Interest payments to certain foreign parent and associated companies may be treated as distributions and consequently not allowed as a deduction against Irish profits under particular circumstances.
Trading losses can be carried forward indefinitely, even on a change of ownership of a company, provided no major change takes place in the nature or conduct of the trade.
Losses incurred in a trade can be offset against other trading income in the same accounting period or the preceding accounting period. Trading losses can be offset against non-trading income on a' value basis' (i.e. taking account of the applicable corporation tax rate so that, for example, only half the amount of the losses subject to the 12.5% rate may be set off against income subject to the non-trading rate of 25%).
FOREIGN SOURCED INCOME
Foreign sourced income is normally liable to Irish corporation tax. There are no special rules relating to controlled foreign companies.
A low corporation tax rate regime of 10% on trading profits applied until 31 December 2021 to certain companies situated in the International Financial Services Centre in Dublin. It also applied to certain companies located in the Shannon area until 31 December 2021 and continues to apply to specified manufacturing companies until 31 December 2010. In relation to patents and intellectual property, there are incentives as well as generous research and development credits.
RESEARCH & DEVELOPMENT
ACCOUNTING PERIODS COMMENCING ON OR AFTER 1 January 2022
Finance (No. 2) Act 2008 increased the R&D credit for all qualifying expenditure to 25% where the expenditure is incurred in an accounting period commencing on or after 1 January 2009. Finance (No. 2) Act 2008 also made changes to the way in which R&D credits are calculated for building expenditure in accounting periods commencing on or after 1 January 2009. New provisions creating greater flexibility in the use of credits were also introduced with effect from 1 January 2009. R&D for the purposes of the relief includes basic research, applied research or experimental development. These activities must seek to achieve scientific or technological advancement and involve the resolution of scientific or technological uncertainty.
A company which carries on a trade in Ireland, undertakes R&D activities in Ireland or within the EEA and incurs the expenditure shall be entitled to the credit. Where the R&D Company does not trade, the company may nevertheless qualify for the credit if it is a 51% subsidiary of a trading company or of a holding company of trading companies. This will allow expenditure incurred by a dedicated R&D company of a trading group to qualify for the relief. Also, where the company is not a member of a trading group and is in its pre-trading phase, provision is made to allow R&D carried out by that company to qualify for the credit at a later date.The credit can be used when the company commences to trade and has a corporation tax liability. This facilitates the claiming of credits by so-called 'campus companies' when they commence trading.
Under legislation enacted in 2004, certain exemptions and relaxations were introduced with respect to qualifying holding companies. These include exemption from tax on capital gains on disposals of shareholdings of 5% or more in trading companies resident within EU countries or in countries with which Ireland has a double tax agreement.
FOREIGN TAX RELIEF
Irish resident companies can obtain a credit for foreign tax suffered in territories with which Ireland has a tax treaty. There are currently 55 agreements in place, of which 48 are in effect. Unilateral relief is also available in respect of overseas tax suffered under certain circumstances.
Trading losses can be transferred within a group in the same accounting period provided a shareholding test is satisfied.
RELATED PARTY TRANSACTIONS
There is currently no transfer pricing legislation in place in Ireland. However Transfer Pricing is due to be enshrined into Irish legislation in the coming months and will come into effect in March 2011. Draft transfer pricing legislation endorsing the OECD Transfer Pricing Guidelines and the arm's length principle has been released which will bring the Irish tax regime into line with OECD guidelines. There are two unique aspects of the draft legislation which are as follows:
- the new tax regime is confined to related party dealings that are taxable at Ireland's corporate tax rate of 12.5% (i.e. trading transactions); and
- a so called 'grandfather' clause is included whereby arrangements entered into between related parties prior to 1 July 2021 are excluded from the new regime.
The grandfather clause creates a short lived opportunity for multinationals in Ireland to consider whether their arrangements fall outside the scope of the new transfer pricing rules. In addition to the above, under current legislation, certain disposals of assets between connected parties are deemed to be for market value.
See above text regarding withholding tax on dividends paid by Irish companies. Payments of certain types of royalties and rents to non-residents are subject to withholding tax at 20%.
Dividends, interest and royalties paid by Irish companies to residents of EU countries or countries with which Ireland has a double tax agreement are, subject to meeting certain conditions, exempted from withholding tax or liable at a reduced rate. Tax at 20% is deducted from payments made by Government and State Bodies in respect of most professional services.
In relation to deposit interest, certain financial institutions are required to withhold tax at 25% from interest paid or credited on deposit accounts of residents on or after 1 January 2009. Previously the retention tax rate was 20%. Companies within the charge to Irish tax may opt to receive such interest gross. The rate of retention tax that applies to life assurance policies and investment funds has also increased from 23% to 26% in respect of payments including deemed payments made on or after 1 January 2009. In addition, foreign life policies that are personal portfolio life policies will be taxed at 46% rather than 43% with effect from 1 January 2009.
There are no exchange controls in Ireland.
The standard rate of VAT in Ireland is 21% with effect from 1 January 2010, with a lower rate of 13.5% applying to certain goods and services. There is also a 0% rate of VAT that applies to certain goods/services.
A company is obliged to register for VAT if its turnover from the sale of goods exceeds €75,000 or if its turnover from the provision of services exceeds €37,500. The threshold for VAT in Ireland for a trader with no establishment in Ireland is nil, subject to a number of exceptions.
VAT returns are generally made on a bi-monthly basis. However, a company which is constantly in a repayment position may obtain approval to make returns on a monthly basis. For smaller businesses, the frequency of filing VAT returns has been reduced effective from July 2007. The option to file on a half-yearly basis and every four months will be available where certain conditions are met. VAT is not recoverable on non-business expenditure nor on certain other expenditure such as cars, petrol, hotel accommodation, meals. VAT on conference related accommodation expenses are allowed from 1 July 2021 onwards if certain conditions are satisfied.
12.5 or 25%
Income Tax Rate
Corporate Tax Rate
Sales Tax / VAT Rate
Last Update: Nov 2010
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