Tax & Business

Once you carry on a trade you will be subject to one or another form of taxation. The type of tax obviously will depend on factors such as legal form and nature of the business. The profits of sole traders and partnerships are subject to income tax. Limited company profits are subject to corporation tax on taxable profits.

The standard rate of corporation tax is 12.5%

In addition, a corporate tax rate of 12.5% applies to the trading income of small companies/groups with trading income not exceeding €254,000. Marginal relief applies if trading income is between €254,000 and €317,500.

Income from the sale of goods manufactured in Ireland and from some service activities is taxed at an effective rate of 10%. This relief will continue until 31st December 2010.

However, a corporation tax of 25% will apply to non-trading income of a company.

Most businesses are obliged to register for VAT, subject to annual turnover threshold limits of €25,500 for the supply of services and €51,000 for the supply of goods. This means you must account for VAT.

Where the annual turnover is below the appropriate threshold, there is not a requirement to account for VAT but you may voluntarily elect to do so. The potential benefit in registering if turnover is below this threshold is that VAT registered suppliers may claim a refund or credit for VAT paid on purchases made for their businesses.

The VAT rates currently applying are as follows:

  • 23% - The standard rate applies to goods and services not specifically categorised as exempt or subject to VAT at any of the rates listed below.
  • 13.5% - Applies to construction services, hotel accommodation, short term car rentals, newspapers, magazines, electricity, hotel/restaurant meals, cinema admission, general agricultural and veterinary services, driving tuition, general repair and maintenance services, property (freehold and long leases)
  • 4.4% - Horses, livestock and certain agricultural products.
  • 0% - Items including children's clothing, food, oral medicines, certain books, certain medical equipment and appliances and exported goods.

The registration for any category of taxation has been simplified and the appropriate tax registration form for each business category is as follows:

  • A sole trader whose turnover is expected to be less than €126,973 per annum should complete FORM STR
  • A sole trader whose turnover is expected to exceed €126,973 per annum along with partnerships should complete FORM TR1
  • Limited companies are required to complete FORMTR2

The Revenue Commissioners will be able to offer more detailed information and you should contact the local office or access their Small Business Page at