Tax Toolkit / Tax Summary / Corporation Tax

Film Tax Credit

The operation of the Regional Film Development Uplift at the 5% rate is extended to the end of 2021. The tapering of the Uplift rate will commence in 2022, reducing at first to 3%.

Knowledge Development Box (KDB)

The KDB is extended to 1 January 2023 for qualifying companies.

Capital Allowances for Intangible Assets

For specified intangible assets, a balancing charge, or clawback of capital allowances made, does not currently arise where a balancing event occurs more than five years after the beginning of the accounting period of the company in which the asset was first provided.

With effect from 14 October 2020, balancing charges may now arise in respect of specified intangible assets acquired on or after 14 October 2020 regardless of when a balancing event occurs.

Emissions-based limits on capital allowances and expenses for certain road vehicles
The Minister is reducing the amount of expenditure that can qualify for tax relief for certain categories of commercial vehicles. This provision will apply from 1 January 2021.

Corporation Tax is charged on all profits (income and gains), wherever arising, of companies resident in the State, with some exceptions, and non-resident companies who trade in the State through a branch or agency.

How is a Company Taxed?

Companies pay Corporation Tax. This tax is charged on the company's profits which include both income and chargeable gains. A company's income for tax purposes is calculated in accordance with Income Tax rules. Chargeable gains are calculated in accordance with Capital Gains Tax rules.

What is the rate of Corporation Tax?

Corporation Tax:

  • 12.5% for trading income
  • 25% for income from an excepted trade (as defined in part 2 of the Taxes Consolidation Act)
  • 25% for non trading income, for example rental and investment income. CT is charged on the profits in a company’s accounting period. This period cannot be longer than 12 months. If the tax rate changes in the accounting period, profits will be apportioned on a time basis and taxed accordingly.

How do I decide whether to trade as a Sole Trader or as a Company?

Your own individual circumstances will dictate whether you should operate as a limited company or as a sole trader. In addition to the taxation issues you need to consider there are various other practical and legal matters which should be taken into account when setting up a company and on which you should seek professional advice.

What is Corporation Tax charged on?

All profits (income and gains), wherever arising, of the companies.

Basis of Assessment

Corporation Tax is assessed on the profits of a company's accounting period at the relevant Corporation Tax rate in force during the accounting period.

Where the rate of Corporation Tax changes during an accounting period, the profits of that period are apportioned on a time basis and taxed at the appropriate rate for the purpose.

Accounting Period

An accounting period for tax purposes is a period of not more than twelve months and is normally the period for which the company makes up its annual accounts.

Company capital gains

Capital gains, other than gains from development land, are included in a company's profits for Corporation Tax purposes and are charged to tax under a formula that means in effect that tax is paid at the prevailing capital gains tax rate.

Company Residence

A company resident in the state is liable to Corporation Tax on its worldwide profits, not just its Irish source profits. Whether or not these profits are brought into Ireland is irrelevant for this purpose.

The term 'residence' was not, until recently, defined in law. The general rule was that companies, whose 'central management and control' was exercised in the State, were treated as resident here. This rule or test emerged as a result of judicial decisions set down in case law. Factors to be taken into account in establishing where the company's central management and control lie include, for example, where the important questions of company policy are determined, where the majority of directors reside, where the negotiation of major contracts is undertaken and where the company's head office is located.

Paying Corporation Tax & Filing Obligations

The Self-Assessment system 'Pay & File' applies to companies. The obligations of a company with regard to paying Corporation Tax and filing its return are as follows:

Compute and pay its preliminary tax liability by the specified date.

Complete and file, on line, a Form CT1 and where applicable a Form 46G

Pay any balance of tax due when lodging the return i.e. within nine months of the end of the accounting period. (The specified return date and payment due date is the 21st day of the applicable month. This date is extended to the 23rd of the applicable month for companies who file their return and pay any associated tax due via Revenue’s Online Service.

Preliminary Corporation Tax

A company is obliged to pay to the Collector General, via ROS, the amount of preliminary tax appropriate to the accounting period.

The total amount of preliminary tax paid must be equal to or greater than 90% of the company's final liability for the accounting period.

Special provision is made for small companies whose liability does not exceed €200,000.

What expenses can a company set against its profits?

  • A company is, in general, entitled to deductions in respect of revenue expenditure - wholly and exclusively incurred for the purposes of its trade - against its profits.
  • It is not, however, entitled to claim a deduction in respect of business entertainment expenses nor is it entitled to claim a deduction in respect of capital expenditure.
  • It may, however, be entitled to capital allowances in respect of certain capital expenditure e.g. wear & tear allowances - see below.
  • There is an allowance for wear and tear of plant and machinery in use for the purposes of a trade at the end of an accounting period. The allowance is calculated by reference to the cost of the item (less any grants received) and the allowable expenditure may be written down at the rate of 12.5% on a straight line basis. A wear and tear allowance is also available in respect of expenditure incurred on motor vehicles - also at the rate of 12.5% on a straight line basis.
  • Capital allowances are also available in respect of expenditure on transmission capacity rights, computer software, energy efficient equipment including electric and alternative fuel vehicles, and industrial buildings and specified intangible assets. The rate at which the expenditure may be written down varies according to the type of expenditure incurred.
  • It should be noted that depreciation of capital assets as computed for audited accounts purposes is not an allowable expense against the company's income for the purposes of Corporation Tax.

What about pre-trading expenditure?

Expenditure which is wholly and exclusively laid out for the purposes of a company's trade or profession in a three year period before commencement is allowed as a deduction in calculating the profits of the company following commencement.

Standard Rate on Trading Income 12.5% from 1 January 2003
Investment/Rental Income 25%

Company Residence

Finance Bill 2014 will amend Ireland's company tax residence rules to provide that all companies that are incorporated in Ireland will be tax resident here, unless regarded as resident in a territory other than the State for the purposes of a tax treaty. The change will come into effect for new companies from 1 January 2015 while a transition period will apply until the end of 2020 for existing companies. This change will bring Ireland's rules into line with the rest of the OECD.

Intangible Assets

A company may claim capital allowances for capital expenditure incurred on specified intangible assets against the income from ‘relevant activities’ of a company. Examples of specified intangible assets include patents, copyrights, trademarks and know-how.

‘Relevant activities’ includes the managing, developing and exploiting of specified intangible assets or the sales deriving the greater part of their value from the use of specified intangible assets. These activities are treated as a separate ‘relevant trade’ for the purposes of claiming capital allowances. intangible assets are treated as plant and machinery for capital allowances purposes. The normal wear and tear rules apply. A company may claim the amount of amortisation or any impairment charged in the Statement of Comprehensive Income in each accounting period.

Alternatively, a company may elect to claim capital allowances over a fixed write-down period of 15 years at:

  • 7% per annum of qualifying expenditure
  • 2% in the final year.

Finance Act 2017 introduced a cap on the amount of relief that may be claimed in an accounting period. This cap applies to claims in respect of capital expenditure on specified intangible assets on or after 11 October 2017. The level of deduction cannot exceed 80% of the trading income of the relevant trade for the accounting period.

Accelerated Capital Allowances for Energy-efficient Equipment

This is a measure to incentivise companies to invest in energy-efficient equipment. It allows them to deduct 100% of capital expenditure incurred on eligible equipment (that meets specified energy-efficiency criteria) from trading profits in the year of purchase rather than over the usual 8 year period for plant and machinery. This scheme for energy efficient equipment is extended for a further three years, until 31 December 2023.

Payment - Small Companies

With effect from 6 December 2007 a small company is a company with a corporation tax liability of less than €200,000 in the preceding year. Preliminary tax of at least 90% of the liability for the period or 100% of previous year's liability is due 31 days before the end of their accounting period, and before the 23rd of that month. New or start up companies with a Corporation Tax liability of less than €200,000 in their first accounting period will not be required to pay Preliminary Corporation tax. The liability is paid when the return is filed.

Payment - Other Companies

  • Finance (No.2) Act 2008 provides for revised arrangements for the payment of preliminary tax by large companies with a tax liability of more than €200,000 (in their previous accounting period).
  • The new arrangements provides for payment of preliminary tax by large companies in two instalments.
  • The first instalment will be payable in the 6th month of the accounting period (i.e. 21st/23rd June for a company with calendar year accounts) 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 (as before) in the 11th month of the accounting period i.e. 21st/23rd November for a company with calendar year accounts) and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.
  • The revised arrangements apply generally where the accounting period is more than 7 months in length (for shorter accounting periods, preliminary tax of 90% of tax liability is payable in one instalment as before)

Start-Up Companies - 3 Year Tax Exemption

The scheme which provides relief from corporation tax on the trading income and certain gains of new start-up companies in the This scheme provides relief from corporation tax on trading income (and certain capital gains) for new start-up companies in the first 3 years of trading.

This scheme is being enhanced to allow any unused relief arising in the first 3 years of trading due to insufficiency of profits to be carried forward for use in subsequent years. This is subject to the maximum amount of relief in any one year not exceeding the eligible amount of Employers' PRSI in that year.

Research and Development (R & D) Tax Credit

The R&D Tax Credit regime provides for a 30% tax credit for incremental expenditure on certain research and development (R&D) activities. For accounting periods beginning on or after 1 January 2015, the requirement to subtract base-year (2003) R&D expenditure has been removed and all qualifying R&D expenditure will be eligible for the 30% tax credit.

The limit on the amount of qualifying research and development expenditure that can be outsourced to another company is also being increased from 5% to 15%.


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