Every company that is tax resident in Ireland pays corporation tax on its worldwide profits, while non-resident companies trading in Ireland through a branch or agency pay it on the profits connected to that Irish trade. Corporation tax is administered by the Revenue Commissioners under a self-assessment system, which means the company itself is responsible for calculating its liability, paying it on time and filing an accurate return.
Corporation Tax Rates
- 12.5% on trading income.
Profits from an active trade, such as selling goods or providing services, are taxed at Ireland's headline rate of 12.5%.
- 25% on non-trading income.
Passive income, including most rental income, interest and certain investment income, is taxed at 25%.
- Capital gains.
Gains on the disposal of assets are charged so that the effective rate matches the capital gains tax rate of 33%, with some exceptions for development land.
- 15% minimum rate for very large groups.
Under the OECD Pillar Two rules, groups with global turnover of €750 million or more pay an effective minimum rate of 15%. This does not affect most small and medium businesses.
Whether income counts as trading or non-trading income is a question of fact, and it can significantly change the amount of tax a company pays.
Accounting Periods
Corporation tax is calculated by reference to accounting periods, which cannot exceed 12 months. A company's first accounting period generally begins when it starts to trade or otherwise comes within the charge to tax. Many companies choose a financial year end of 31 December, although any date can be used, and the choice of year end affects every tax and CRO deadline that follows.
Preliminary Tax
Irish companies pay most of their corporation tax in advance, before the accounting period has even ended. This advance payment is known as preliminary tax.
- Small companies, whose corporation tax liability for the previous period did not exceed €200,000, pay preliminary tax in a single instalment by the 23rd day of the 11th month of the accounting period. The amount must be at least 90% of the current period's liability or 100% of the previous period's liability.
- Large companies
pay in two instalments, in the 6th and 11th months of the accounting period, bringing the total paid to at least 90% of the final liability.
- New companies
with a corporation tax liability of €200,000 or less in their first accounting period are not required to pay preliminary tax for that period.
Underpaying preliminary tax results in interest charges on the shortfall, even where the full balance is later paid on time.
The CT1 Return and Balance of Tax
Each company must file a corporation tax return, known as the Form CT1, through Revenue Online Service (ROS). The return and any balance of tax due must be filed and paid by the 23rd day of the ninth month after the end of the accounting period. For a company with a 31 December year end, that is 23 September of the following year. The CT1 is filed alongside a Form 46G (Company), which reports certain payments made to third parties.
Late returns attract a surcharge of 5% of the tax due (capped at €12,695) where the return is filed within two months of the deadline, rising to 10% (capped at €63,485) after that. A late return can also restrict the company's ability to claim certain loss reliefs and credits.
Reliefs Available to Irish Companies
- Start-up company relief:
qualifying new companies can receive relief from corporation tax on trading profits for their first three years of trading, where the annual liability does not exceed €40,000, with marginal relief up to €60,000. The relief is linked to the employer PRSI the company pays.
- Research and development tax credit:
35% of qualifying R&D expenditure for accounting periods beginning on or after 1 January 2026.
- Trading losses:
losses can generally be set against other profits of the same period or the previous period, or carried forward against future profits of the same trade.
The Close Company Surcharge
Most owner-managed companies are "close companies", meaning they are controlled by five or fewer participators or by their directors. A close company that does not distribute its investment and rental income within 18 months of the end of the accounting period can face a surcharge of 20% on that undistributed income. Certain professional services companies face an additional surcharge on part of their undistributed trading income.
The Importance of Getting It Right
Corporation tax interacts with almost every part of a company's finances, from how directors are paid to when profits are distributed. Interest on late payments, surcharges on late returns and restricted reliefs can add significantly to the cost of non-compliance, so accurate records and well-planned deadlines are essential from the first day of trading.
For further guidance and support with corporation tax registration and compliance, contact Setup Your Company at info@setupyourcompany.ie or call us on 01 628 3177.
