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Corporation Tax

 

 

Services > Taxation > Corporation Tax

 

 

Scope of Corporation Tax

All companies resident in the State and all non resident companies which carry on a trade in the State through a branch or agency, subject to specific exceptions, are liable to corporation tax.

A company which commences to carry on a trade, profession or business is obliged to deliver a written statement within thirty days of commencement to the Revenue Commissioners containing such information as the name of the company, its registered office, the name of the secretary and the nature of the trade, profession or business.

Rate of Tax

The standard rate of corporation tax is as follows for the financial year:

Financial Year

Standard Rate

2003 to date

12.5%

2002

16%

2001

20%

2000

24%

1999

28%

With effect from 1 January 2001 the following rates of corporation tax apply:
(i) 10%
Applicable to the trading profits of manufacturing companies and certain IFSC and Shannon Airport Zone companies
(ii) 12.5%
(iii) 20%
Applicable to residential profits arising from certain residential land transactions.
(iv) 20%
Standard rate applicable to Schedule D, Case I and II profits, with the exception of certain land dealing activities etc.
(v) 25%
Standard rate applicable to Schedule D, Case III, IV and V, certain land dealing activities and income from working minerals and petroleum activities.

 

New start-up company exemption

 

Where a company commences a new trade in 2009 or 2010 it will be exempt from corporation tax otherwise arising for the first three years of trading where the corporation tax does not exceed 40,000 (marginal relief up to 60,000).

 

Basis of Assessment

Corporation tax is assessed on the profits of a company's accounting period at the rate of tax 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 an appropriate rate for the purpose of determining the corporation tax charge for the whole accounting period. An accounting period is a period of not more than 12 months and is normally the period for which a company makes up its accounts.

Payment of corporation tax

From 2006 all preliminary tax of a company must be paid on the 21st of the month before the end of the accounting period. Preliminary tax is at least 90% of the final corporation tax liability. Small companies can elect to pay 100% of the final liability of the prior accounting period. A small company is one where the corporation tax liability does not exceed Euro200,000. New companies who do not expect their corporation tax to exceed Euro200,000 in their first year are not obliged to pay preliminary tax in their first year

 

R&D Tax Credit

A 25% tax credit of the incremental qualifying research and development expenditure is available for companies engaged in in-house qualifying research and development undertaken within the European Economic Area. (Prior to 1/1/09 the credit was 20% of the incremental expenditure.
The tax credit applies to the incremental amount over that spent in a base year. The base year to be used is 2003 for expenditure incurred up until 2013. 10% of the R&D work may be subcontracted to unconnected 3rd parties.

Dividends and other distributions

Dividends and other distributions (including certain types of interest) are not deductible in computing trading profits. Dividends and other distributions paid by a company resident in the State are not chargable to corporation tax when received by the a company resident in the State.

Interest and other annual payments

A company is normally entitled to deduct payments of interest (other than interest treated as a distribution), royalties and other annual payments made by it in computing its corporation tax liability. In certain circumstances the company may have to deduct income tax from the payments and account for it to Revenue.

Patent royalties

Full relief from corporation tax is allowed in respect of royalties derived by an Irish resident company in respect of a patent if the work leading to the grant of the patent was carried out in the State. The royalties must be paid in connection with a manufacturing process or by a party unconnected to the company to qualify for relief. Relief from income tax is, in certain circumstances, available to shareholders in respect of all or part of any distribution made by a company out of its royalty income.

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 corporation tax under a formula that takes into account the appropriate rate of capital gains tax. Gains by the companies from the disposals of development land are chargeable to capital gains tax and are not, therefore, included in profits chargeable to corporation tax (see section on capital gains tax).

A company which ceases to be resident in the State is treated as having disposed of all of its assets at their market value when it so ceases. Assets which continue to be used in Ireland by a branch or agency of the company or where the company is ultimately controlled by residents of a tax treaty partner country are not subject to this provision.

 

 

 

 

 

 

 

 

 

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