Ireland tax planning in 2023
- VAT registration is mandatory if annual sales forecast exceeds the following thresholds: i) €75,000 for supplying goods and ii) €37,500 for supplying services.
- In reality, registration for VAT is time-consuming process. Securing a VAT number mandates Clients to have economic substance in Ireland, including leasing a physical office and at least part time employee stationed at the office. The Government conducts site visits to ensure economic substance is in place;
- 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.
- The standard VAT rate in Ireland is 23%. However, goods/services may be subject to reduced rates of 0%, 9% or 13.5%.
- An Irish LLC is allowed to register for VAT if it makes taxable supplies.
- VAT returns must be submitted bimonthly.
- Irish resident companies are required to pay corporation tax on their worldwide income and capital gains (standard rate – 12.5%). Where a company is resident in a treaty country, liability depends on whether the company is trading through an Irish permanent establishment (PE);
- An Irish LLC can reduce their tax bill by foreign tax paid on the same income. Excess foreign tax credits can be i) carried back to previous years or ii) claimed from the Governments in the form of cash or iii) offset against payroll taxes;
- An Irish resident company must file tax returns within 10 months of the accounting year end;
- If a company incurred 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 previous year’s liability) or ii) 90% of the current year liability by the 21st of the month prior to the year end. The balance of the tax is payable on the date the return is due to be filed;
- For companies with a tax liability exceeding €200,000, 2 instalments will be payable – the 1st in the 6th month and 2nd in the 11th month after 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;
- There is a surcharge for late filing of income tax returns at the following rates:
i) 5% (up to maximum of €12,695) / 10% (up to maximum of €63,485) of the tax liability for the year of assessment, depending on the number of months past the due date.
- A tax credit of 25% of the incremental R&D expenditure can be offset against a company’s corporation tax liability in the year in which it is incurred. Any remaining excess can be carried forward indefinitely for use against future corporation tax liabilities;
- Irish companies can claim tax credit equivalent to 25% of cost spent 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;
- Corporate tax at 6.25% applies to certain profits from qualifying patents. Shareholders of company receiving dividends from patent income may also enjoy ‘tax-free status’;
- Capital expenditure incurred on acquisition or development of intangible assets are given allowances. The allowances may be granted at 7% per annum for the first 14 years and 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.
- QIAIF investment funds are also tax exempt form income, capital gains and stamp duty taxes as long as it is owned by non-tax residents and the fund only deals with real estate investments.
Other Tax Consideration
- Business registered in Ireland does not have capital duty or net wealth taxes;
- 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.
- An Irish LLC suffers 33% capital gains tax on gain arising from disposal of capital assets;
- Stamp duty of 1% applies on transfer of common stock or marketable securities. For most other forms of property, stamp duty applies at 2%;
- To promote renewable energy sources, an Irish LLC suffers a carbon tax rate at €20 per tonne of CO2 emitted and is added to the cost of fuel.
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?You can find all relevant information regarding Irish employment permits on the website of the Department of Jobs, Enterprise and Innovation.