Irish Tax Guide for Your New Business: From VAT to Corporation Tax

One of the main factors influencing foreign businesses’ decision to locate in Ireland is the renowned 12.5% corporate tax rate. However, you must comprehend the tax system from the beginning to reap the maximum benefits and stay clear of expensive fines. Value Added Tax (VAT) and Corporation Tax are two necessary taxes that every Irish business needs to be aware of. This article also explains how to register and comply with these taxes.

Priority one should be given to tax registration (Form TR2)

Your business must register with the Irish tax authorities, the Revenue Commissioners, as soon as it is incorporated with the Companies Registration Office (CRO).

Form TR2, which you must fill out, registers your company for:

• Company Tax
• VAT, if any
• PAYE (for payroll tax if you’re hiring staff)
• Before trade or invoicing may start, TR2 must be submitted, either online or by mail.

Ireland’s Corporation Tax: Two Important Rates

12.5% of Income from Active (Trading)

This rate applies to “trading income,” or profits from fundamental business operations. Among the examples are:

• Selling goods in Ireland or online
• Offering IT or consulting services
• Managing software development or SaaS operations
• By international standards, this 12.5% rate is highly competitive.

25% of Non-Trading Passive Income

The tax rate on non-trading income is higher, at 25%. This comprises:

• Interest received on deposits
• Income from rentals
• Royalties (if they have nothing to do with main activities)
• Dividends (in specific situations)

Accurate tax planning depends on correctly differentiating between trading and non-trading Revenue.

When Must You Register for Value Added Tax (VAT)?

Standard Guidelines and Requirements for Resident Businesses

• The annual turnover for the sale of items is €75,000
• €37,500 in services revenue per year
• VAT registration is required if your resident Irish company’s Revenue reaches these limits.

Essential Guidelines for Non-Resident Businesses

If your business is not physically located in Ireland, but:

• Provides products or services to clients in Ireland.
• Additionally, those clients are not registered for VAT.

Regardless of turnover, VAT registration is then required from the very first sale.

For international businesses that are remotely or digitally entering the Irish market, this is essential. Penalties and backdated VAT duties may be incurred for failing to meet this requirement.

Section 486C: Startup Tax Relief for New Businesses

For the first three years, new businesses may be eligible for partial or whole corporation tax reduction under Section 486C of the Taxes Consolidation Act.

Among the conditions are:

• The business must be truly fresh; it cannot be rebranded or reformed.
• To be eligible for complete relief, the yearly corporation tax liability must not exceed €40,000.
• Employer PRSI contributions are linked to relief; hence, businesses that hire employees receive greater relief.

This plan promotes early investment and job development. For entrepreneurs considering establishing a headquarters in Ireland, it’s a significant advantage.

Conclusion and Upcoming Actions

When applied appropriately, Ireland’s tax system is transparent, reliable, and very attractive. The following factors determine success:

• Tax registration on time with TR2
• Recognising the difference between active and passive income
• Appropriate VAT registration, particularly for visitors
• Making use of startup tax breaks

Does tax planning seem complicated to you? You are not alone in navigating it. From registering with Revenue to filing your annual returns and offering advice on tax optimisation tactics, our knowledgeable staff provides comprehensive tax assistance. If you have any questions, please do not hesitate to contact us.