Global expansion is a great way to grow your business and Ireland offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO-service we will take care of the complicated legwork so that you can focus on your business goals in Ireland.
Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. It poses major issues for companies seeking to develop their international profile. Ireland is no exception, with the Revenue Commissioners imposing fines and other sanctions for late or fraudulent returns and not paying taxes on time.
We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance. To keep you informed and updated too, we created this guide which includes the basic facts regarding tax regulations in the Ireland.
Overview of Taxes in Ireland
- Individual Income Tax - 20% - 40% (Plus, surcharges for Universal Social Charge, USC)
- Value Added Tax - 23% (standard rate), (Rates of 13.5%, 9% and 4.8% for some categories)
- Corporate Income Tax - 12.5% (standard rate), 25% (non-trading income)
- Withholding Tax - 20% (Applies to resident individuals, non-resident individuals and companies)
- Wage Withholding Taxes - (Deductions for Payment Related Social Insurance and USC depend on earnings)
- Local Property Tax - (Has applied since 2013, depends on value)
Individual Tax in Ireland – Single, Married
Ireland residents are taxed on all their worldwide income, from whatever source. Tax residency in Ireland applies if an individual is a resident or domiciled in Ireland for 183 days in a tax year or 280 days in the current and previous tax year, with a minimum of 30 days in each.
Residents who are not domiciled in Ireland are liable for taxes on their Irish-sourced income, foreign income from working in Ireland and other foreign income paid into Ireland. Non-residents are taxable only on Irish-earned income.
Income Tax Rates
- 0 - €35,300 (US$42,000) - 20% (Single or widowed person, no dependent children)
- €35,301 €44,300 (US$52,700) - 20%, and a balance over 40% (Married couple, one income)
- €44,301 €70,600 (US$84,000) - 20%, and a balance over 40% (Married couple, two incomes of at least €26,300 (US$31,290)
Taxpayers in Ireland are also entitled to tax credits to reduce their tax liability. These can vary according to personal circumstances, as shown below:
- €1,650 (US$1,963) – Employee tax credit (formerly PAYE tax credit)
- €1,650 (US$1,963) – Earned income tax credit
- €1,650 (US$1,963) – For a widowed person or surviving civil partner qualifying for single person child carer credit
- €2,190 (US$2,605) – For a widowed person or surviving civil partner (without dependent children)
Ireland Individual Tax Rules
- The tax year runs from January 1 till December 31. Employers can choose a different tax year.
- Liability for taxation depends on residency. Tax residency applies if an individual is resident and domiciled in Ireland for 183 days in a tax year, or 280 days in a tax year plus the previous tax year, with a minimum of 30 days in each. Ireland residents are taxed on all their worldwide income. Non-residents are liable only for Irish-sourced income.
- Different tax bands and rates apply to single or widowed individuals, married couples on one income or married couples with two incomes.
- Universal Social Charge (varies between 0.8% and 8%) is applied on gross income, before any pension contributions or Pay Related Social Insurance deductions.
- Under the ‘Pay As You Earn’ (PAYE) system, income tax is paid on an exhaustive list of categories – wages, fees, profits, pensions, tips, bonuses, overtime, and benefits ‘in kind’ such as company cars.
- Individual tax rules also apply to other sources of income. Gifts or inheritances may be liable for Capital Acquisitions Tax; the sale of assets, such as property may attract Capital Gains Tax.
VAT & Excise Duty
Ireland has a standard rate of Value Added Tax at 23%, one of the highest among its fellow European Union (EU) members. It is payable on all goods and services not covered in reduced rate categories. These are:
- 13.5% - coal, heating oil, gas, electricity, vet fees, building services, agricultural contracting, short-term car hire, cleaning, and maintenance services
- 9.0% - newspapers and sporting facilities, e-books, electronic newspapers, brochures, maps, and programs. Until December 2021 – hospitality and tourism, admission to cinemas, theatre, museums and fairgrounds, amusement parks
- 4.8% - agriculture and livestock
- Exempt – financial, medical, and educational services
Generally, VAT and import duty is due on all goods brought into Ireland from outside of the EU, including online or by mail order, and will be charged at the same rate that for those goods as it applies in Ireland. From July 2021 exemption on goods less than €22 (US$26) bought outside the EU no longer applies. However, within the EU, import duty is usually paid in the member state where the goods are bought.
Ireland applies various rates of excise duty on mineral oil, energy products and electricity, alcohol, tobacco, sugar-sweetened drinks, excise licenses and betting.
Employers’ Social Security and Statutory Contributions
Employers deduct Pay Related Social Insurance (PRSI) contributions from employees’ wages and remit these to the Revenue Commissioners. Employers also make contributions based on their employees’ earnings.
- Employers pay 8.8% of Class A employee earnings of up to €398 (US$473) weekly
- Employers pay 11.05% of Class A employee earnings over €398 (US$473) weekly
Employees earning less than €352 weekly (US$418) are exempt from contributions. Those earning more than €352 weekly pay 4% of their earnings towards PRSI, though this can be reduced by credits.
Employees have the legal right to see the PRSI record/summary that is kept by their employer and can make a request for the statement every three months. The Employment Detail Summary records the employees’ pay, income tax, PRSI and Universal Social Charge (USC) deductions made by the employer and remitted to the Revenue. It is illegal for the employer not to keep records. To assert this, the Revenue makes regular checks.
Ireland Corporate Taxes
Companies resident in Ireland pay Corporate Income Tax (CIT) on their worldwide profits at the following rates:
- 12.5% - standard trading rate
- 25% - non-trading ‘passive’ rate
- 33% - capital gains rate
Ireland’s standard rate is the third lowest in the world among nations monitored by the Organization for Economic Cooperation and Development, who proposed in 2021 a minimum standard rate of 15% among developed countries.
Non-trading income derives from such as interest, rents, and royalties. The higher rate can also apply to business undertaken outside Ireland by a resident company.
Non-resident companies pay corporation tax on profits from the trading of their branch or agency in Ireland, plus income tax on Irish-sourced profits. Returns must be filed, and payment made by the 21st of the ninth month following the accounting period.
Capital Gains & Withholding Tax
Capital gains accrued through disposing of assets attracts 33% taxation on profits.
Dividends paid to Irish companies are exempt from withholding taxes. Dividends to resident individuals, non-resident individuals and companies have 20% withholding tax. If the non-resident individual or company reside in another European Union member nation rates there may be no withholding tax.
Corporate Deductions and Capital Allowances
Companies in Ireland can claim capital allowances to reduce their liability for taxes. These include:
- Plant and machinery (12.5% over eight years)
- Industrial buildings (4% over 25 years)
- Motor vehicles
- Equipment expenditure
- Computer software
- Crèche or gym equipment for employees (15% over seven years)
- Pre-trading expenditure for the three years before trading began
- Donations to a Revenue-approved charity, with a minimum €250 (US$300) per year
Companies can claim Accelerated Capital Allowance (ACA) at 100% for categories including electric and alternative fuel vehicles, gas vehicles and gas refueling equipment.
Stamp Duty on transferring residential property is 1% on the first one million Euro (US$1,189,780) and 2% on excess over one million.
Avoid risks – make the right move
Ireland’s tax regulations demand expert advice for incoming foreign companies. Businesses cannot stumble into mistakes over payroll and taxation, running the risk of fines and sanctions. Don’t waste time worrying about your move into Ireland – contact us now.