Start-up companies

A start-up trading company can get a three year exemption which reduces its corporation tax charge (up to €40,000 per annum) to nil.

There is marginal relief if the charge is between €40,000 and €60,000. In theory, this means a start-up company can earn annual net profits of €320,000 (€40,000 divided by 12.5%) and pay no tax.

However, the relief is linked to the amount of employer’s PRSI paid by the claimant company, subject to a maximum of €5,000 per employee, and an overall limit of €40,000. The relief does not apply to trades carried on by associated companies.

Standard rate

The standard rate of corporation tax (s 21) is 12.5%.

Foreign dividends paid from trading profits are taxed at 12.5%. If the dividend is not paid from trading profits, it is taxed at 12.5% provided:

(a) 75% or more of the paying company’s profits are trading profits, or derived from trading profits arising in EU States or treaty countries.

(b) 75% or more of the recipient’s assets, on a consolidated basis, must consist of trading assets.

Where the recipient company owns not more than 5% of a paying company based in an EU State or treaty country, the dividend is also taxed at 12.5%.

Excess foreign tax credits in respect of dividends taxed at 12.5% are not available for set-off against dividends taxed at 25% (but not vice versa).

Higher rates

The following types of income are taxed at 25% (s 21A):

(a) untaxed interest and income from foreign property (Case III income),

(b) miscellaneous income not taxed under any other heading (Case IV income),

(c) rental income (Case V income), and

(d) income from mining activities, petroleum activities, and dealing in land.