Ireland accounting & tax considerations in 2021
Since 2003, Healy Consultants Group PLC assists our Clients with timely compliance of their annual legal, accounting and tax obligations.
- An Irish-resident company is taxed on its worldwide income. Non-resident companies are taxable only on Irish-sourced income. A company is considered resident in Ireland if i) it is incorporated in Ireland ii) it conducts business in the country and is managed and controlled from Ireland or iii) it conducts business in the country and its voting power is controlled by Irish resident shareholders.
- Companies in Ireland (including branches) pay corporate tax at 12.5% on their profits.
- If a company incurs a tax liability of less than €200,000 in the previous year, it will be required to pay either i) preliminary tax of 100% (based on the previous year’s liability) or ii) 90% of the current year’s liability by the 21st of the month prior to the year end. The balance of tax is payable on the date the return is due to be filed.
- For companies with a tax liability exceeding €200,000, two instalments are payable i) in the 6th month and ii) in the 11th month after the accounting period. The instalment amounts will be either i) 50% of the preceding year’s liability or ii) 45% of the current year’s liability. The balance of the tax is payable on the date the return is due to be filed.
- Dividends paid to both Irish and foreign parent companies are withholding tax-exempt, provided corporate tax has been paid on the subsidiary’s profits. If otherwise, withholding tax is levied at the standard corporate tax rate, unless reduced by a tax treaty.
- Interest paid by an Irish company to a non-Irish resident is subject to interest withholding tax at a rate of 20%.
- Royalties are not subject to withholding tax, except for patent royalty payments, which are subject to 20% withholding tax.
- Capital gains tax is typically 33%. Exceptions are i) 40% for gains from foreign life policies and foreign investment products ii) 15% for gains from venture capital funds for individuals and partnerships and iii) 12.5% for gains from venture capital funds for companies.
- Employers must contribute 11.05% of an employee’s gross salary to the Pay Related Social Insurance Fund.
- Employee’s tax liability (Pay As You Earn) is calculated at two rates: i) a standard rate of 20% on annual wages below €35,300 and ii) 40% on annual wages above €35,300.
- For the year 2020/2021, incomes below €16,500 are free of income tax.
- Capital expenditure for the purchase or acquisition of patent rights may be written off in equal amounts over 17 years or the remaining life of the patent, whichever is shorter.
- Stamp duty of 1% applies on transfer of common stock or marketable securities. For most other forms of property, stamp duty applies at 2%.
- Business registered in Ireland does not have capital duty or net wealth taxes.
- Irish companies that suffer trading losses can offset these losses as a means of a relief from tax against i) other trading income for the same accounting period and ii) trading income for the accounting period immediately preceding.
Value Added Tax (VAT)
- VAT registration is mandatory if the annual sales forecast exceeds the following thresholds: i) €75,000 for supplying goods and ii) €37,500 for supplying services.
- The standard VAT rate is 23%, increased from 21% in March 2021. There are also reduced rates of 13.5% and 9% in the tourism and hospitality sectors respectively. Registration is mandatory for any person who independently carries out a business. VAT returns must be submitted bimonthly.
- Should our Client expect turnover to reach i) €75,000 for supplying goods and ii) €37,500 for supplying services, Healy Consultants Group PLC will additionally assist our Client to register for Value Added Tax (VAT).
Filing due dates
Mode of Filing Filing Deadline e-Filing 9 months after end of accounting period
Consequences of late / non-filing of tax returns
- For late filing of corporation tax returns, companies are subject to 0.0219% interest per day on late payments or payments that are not made in full.
- If the company sends the return after the deadline, they will also have to pay a surcharge of i) 5% of the tax due up to a maximum of €12,695 if files within two months of the filing date or ii) 10% of the tax due up to a maximum of €63,485 if filed more than two months after the filing date.
- If the company sends the return after the deadline there will also be restrictions on certain reliefs claimed.
Tax exemptions and rebates
Ireland has a broad network of Income Tax Treaties with 73 countries around the world, including Canada, China, France, Malaysia, Singapore, the United Kingdom and the United States. These treaties help reduce withholding tax in Ireland on overseas income.
Irish Company Legal Tax Exemption
- An Irish LLC can be entirely Irish tax-free once it is i) managed and controlled and ii) tax resident in a country with which Ireland has a double taxation treaty.
- A non-resident company in Ireland is legally tax-exempt if certain conditions are met including i) no business within Ireland or with Irish customers ii) no physical office space in Ireland iii) no employees in Ireland and iv) no banking in Ireland.
- The Irish LLC will only be taxable in Ireland on Irish-sourced income and taxable on all other income in the resident country.
Table of comparison between Ireland onshore, offshore and LLP entities
No Task Tax exempt
1. Ireland corporation tax 0% 0% 12.5% 2. Corporate bank account location Outside Ire Outside Ire Ireland 3. Management and control of entity Outside Ire Outside Ire Ireland 4. Can do business with Irish customers? No No Yes 5. Can have Ireland employees and physical office premises? No No Yes 6. Legal registered address where? Virtual office address where? Dublin Dublin Dublin 7. Annual financial statements and Ireland tax return to be filed? Yes No Yes 8. Must register a branch in the country where our Client lives or has an office? No No No 9. Must register for VAT/GST/Sales tax in Ireland? No No Yes 10. Must visit Ireland once a year? No No No 11. Public register of shareholders and directors? Yes (click link) Yes (click link) Yes 12. Access to international double taxation treaties? No No Yes 13. Must be resident in country with which Ireland has tax treaty in order to be tax-exempt in Ireland N/A Yes (click link) N/A
Ireland tax credits and incentives
As one of the world’s best places to start up a business, Ireland offers several tax incentives and a 12.5% corporation tax rate on active business income. For example:
- A tax credit of 25% applies to the full amount of expenditure incurred by a company on qualifying research and development (R&D) activities. This credit is in addition to the normal 12.5% revenue deduction available for the R&D expenditure, thereby resulting in an effective corporation tax benefit of 37.5%.
- Irish companies can claim tax credit equivalent to 25% of cost of construction or refurbishment works carried out on an R&D building, where 35% of the building must be used for qualifying R&D activities within a four-year period.
- The Knowledge Development Box provides a 6.25% rate of corporation tax to apply to certain profits arising from qualifying R& D assets such as i) a computer programme, ii) an invention protected by a patent or iii) IP for small companies.
- Capital expenditures incurred on acquiring or developing intangible assets are given allowances of i) 7% per annum for the first 14 years and ii) 2% for the 15th year.
- Foreign income dividends are tax exempted if i) the foreign subsidiary is tax resident in the EU or a Treaty Country with Ireland and ii) the dividends are paid out of trading profits of the foreign subsidiary which was subjected to at least 13% of foreign corporate or withholding tax.
- An Irish LLC can reduce its tax bill by foreign tax paid on the same income. This can be done through the double taxation agreements Ireland has with 73 countries. Excess foreign tax credits can be i) carried back to previous years or ii) claimed from a foreign government in the form of cash or iii) offset against payroll taxes.
- Qualifying Investor Alternative Investment Funds (QIAIFs) are also tax-exempt form income, capital gains and stamp duty taxes if they are owned by non-tax residents and the fund only deals with real estate investments.
Tax reporting, accounting and auditing considerations
- Ireland tax reporting is straight forward. All returns can be submitted online.
- Group companies include i) entities in Ireland and in EU member states ii) entities in a treaty country and iii) a company quoted and traded on a recognised stock exchange. Group relief applies to subsidiaries at least 75% owned.
- Healy Consultants Group PLC’s Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis.
- Small companies are exempt from annual financial statements audit if they satisfy 2 out of 3 conditions:
- Turnover of less than €12 million;
- A balance sheet total of less than €6 million;
- Number of employees is less than 50.
- This small company exemption is not applicable to:
- Parent companies and their subsidiaries;
- Banks and financial institutions and intermediaries;
- Insurance companies;
- Companies that file a late annual return.
- Medium-sized companies are exempt from annual financial statements audit if they satisfy 2 out of 3 conditions:
- Turnover of less than €40 million;
- A balance sheet total of less than €20 million;
- Number of employees less than 250.
- All Irish companies are required to file an Annual Return. Our in-house Accounting and Tax Department will assist our Client to prepare this document each year.
Healy Consultants Group PLC fees for accounting & tax support
Ireland accounting & tax task € Registration for VAT and Income Tax 950 Annual accounting & tax 4,950
For an active trading company, Healy Consultants Group PLC will efficiently and effectively discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group PLC will more accurately advise accounting and tax fees.
Monthly book-keeping service
Healy Consultants Group PLC will be happy to provide a monthly book-keeping service for your Irish company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.
For further details of our book-keeping service and our fees, visit this page.
Maintaining accounting, secretarial and corporate structure data
- An Irish entity should maintain proper books of accounts and record all invoices and receipts for their company expenses and income. The Revenue can review company records from time to time. Examples of receipts include those related to business purchases, for example i) assets ii) general business and iii) travel expenses.
- Irish entities should also maintain the secretarial records such as board resolutions and meeting minutes of all the important management decisions taken by the Directors.
- Under Ireland’s legal system for business, the information related to the corporate structure, such as shareholders, directors, shares and secretaries, is centralised by the Company Registration Office (CRO). Any change in the corporate structure of the entity must immediately be notified to the company secretary, to update CRO records.
Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group PLC’s help to clarify your annual reporting obligations.
Legal and compliance
- Ireland is a member of the OECD, it signed the OECD MLI on 7th June, 2017. Furthermore, as a common law jurisdiction, Ireland has a legal system similar to that of UK and US;
- Intellectual property is often the most valuable asset to a company. It is hence important to note the intangible asset should be used for at least 10 years to prevent a clawback of the relief obtained. It comprises:
- Patent, registered design, design right, copyright or invention;
- Trademark, trade name or trade dress;
- Brand or brand name;
- Domain name, service mark or publishing title;
- Authorisations to sell medicines, etc;
- Customer lists, except where acquired as part of transfer of a business as a going concern;
- Certain software;
- Any licence in respect of, and any goodwill attributable to, the above;
- Costs associated with applications for certain legal protection.
- Ireland is a signatory to the European Patent Convention (EPC) and the Patent Cooperation Treaty (PCT). Therefore, our Clients may choose to submit their applications for a patent at the Irish Patents Office; if approved, the patent will be recognized in all 36 member countries of the EPC. Similarly, a PCT application will also be deemed applicable in all EPC countries;
- The Irish company’s directors are responsible for its daily operations and must act in the best interests of the shareholders within the confines of the Companies Act and the common law. An Irish company is required to appoint at least 2 directors;
- R&D means:
- Basic research (experimental or theoretical)
- Work performed with aim of acquiring knowledge, which may or may not be used to develop a practical application in the future;
- Experimentation performed in order to achieve scientific or technical advancement which may be used to produce/improve new/existing material or devices. To secure tax credit, it must be shown the project achieves advancement or resolves current uncertainty.
- Ireland has established a Labour Relations Commission (LRC) and Labour Court to mediate in a fair, efficient and inexpensive manner for resolutions to trade disputes;
- The maximum average work week is 48 hours (including overtime) over a 4-month period, although the general standard working week determined through collective agreements is 39 hours. Overtime rates of pay are all determined through collective agreements; for example, the current registered employment agreement for the construction industry provides for overtime rates of pay of time-and-a-half until midnight Monday to Friday and double time thereafter.
Frequently asked questions
Will my Ireland company have to pay taxes on profits derived from outside Ireland?Yes, Ireland imposes corporate tax on worldwide profits.
When do I need to file my corporate tax returns in Ireland?A company is required to file for tax returns within nine months of the end of its accounting period.
What is the corporate tax rate in Ireland?The corporation tax rate in Ireland is 12.5%.
If I set up a company in Ireland, will it be seen as tax evasion?No, although corporate taxes are low in Ireland, it is completely legal. Big companies like Microsoft have set up their European headquarters in Ireland.
How can I find accountants for my Irish company?Healy Consultants can prepare financial reports, file annual returns and maintain accounting records for Ireland companies.
What are Ireland work permit visa requirements?