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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:
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Financial
Year
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Standard
Rate
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2003
to date
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12.5%
|
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2002
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16%
|
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2001
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20%
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2000
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24%
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1999
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28%
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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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