AITI Chartered Tax Adviser

Corporation tax rates

Start-up companies

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

This relief expires on 31.12.2021 (s 486C).

Standard rate

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

Foreign dividends paid from trading profits are taxed at 12.5% (s 21B). A dividend not paid from trading profits is taxed at 12.5% provided:

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

Knowledge Development Box (KDB)

The KDB rate of corporation tax on profits from patented inventions and copyrighted software (qualifying assets) is 6.25% (s 769I).

Higher rates

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

  • untaxed interest and income from foreign property (Case III income),
  • miscellaneous income not taxed under any other heading (Case IV income),
  • rental income (Case V income), and
  • income from mining activities, petroleum activities, and dealing in land.