Complete 2025–2026 Guide
May 2026 · 11 min read · Abbey Blue Formations Team · Wexford, Ireland
Taxes are the thing most founders say they’ll “figure out later” — and then panic about at year-end.
This guide is written for first-time founders, especially those considering company formation in Ireland for the first time. You don’t need an accounting degree to understand this. By the end, you’ll know which taxes apply to your Irish company, when they kick in, what the rates are, and — most importantly — which reliefs can save you significant money in your early years.
Ireland’s tax system is genuinely founder-friendly. But only if you know how to use it.
“Ireland is the only English-speaking EU member state — and one of very few jurisdictions where a non-resident can own and direct a company with 100% foreign shareholding, without restriction.”
— Abbey Blue Formations
Get a free, no-obligation consultation with our formation specialists. We handle everything — start to finish.
Before the numbers, here’s the context:
These are not minor details — they’re structural advantages that global companies including Google, Meta, and hundreds of startups have used to base their European operations in Ireland.
For you as a startup founder, they translate into real cash savings. Let’s break each one down.
Ireland operates a two-rate corporation tax system:
| Type of Income | Tax Rate |
| Trading income (active business profits) | 12.50% |
| Non-trading income (rents, investments, royalties) | 25% |
When people ask “how much is corporation tax in Ireland?”, they’re usually referring to the 12.5% rate, which applies to the vast majority of startup activity.
Our team reviews your situation and tells you exactly what to prepare. No guesswork, no delays.
You only pay corporation tax on profits — not revenue. If your company makes no profit in its first year (common for early-stage startups), you will owe zero corporation tax.
Your company must file a CT1 return with Revenue within 9 months of your financial year-end, even if the liability is zero.
In 2024, Ireland implemented the EU’s Pillar Two Directive, introducing a 15% minimum effective tax rate for multinational groups with revenue over €750 million. This does not affect the vast majority of Irish start-ups and SMEs..
VAT (Value Added Tax) is not automatic. You only need to register when you cross these thresholds:
Below these thresholds, VAT registration is voluntary. Many early-stage startups choose to register voluntarily to reclaim input VAT on business expenses.
| Rate | Applies To |
| 23% | Most goods and professional services |
| 13.50% | Construction, hospitality, short-term accommodation |
| 9% | Tourism, newspapers |
| 0% | Exports, children’s clothing, most food |
| Exempt | Financial services, medical, education |
If you’re selling software or digital products to EU consumers (B2C), you may need to register for VAT OSS (One Stop Shop) in Ireland and declare VAT across all EU countries from a single Irish registration. This is a significant simplification introduced in 2021 and makes Ireland an excellent EU base for digital businesses.
Once you hire your first employee, a new set of obligations begins. These are administered through Revenue’s PAYE/Payroll system.
| Tax | Who Pays | Rate |
| PAYE (Income Tax) | Employee (deducted at source) | 20% (standard) / 40% (higher) |
| Employee PRSI | Employee | 4% |
| Employer PRSI | Employer | 11.15% (standard) |
| USC (Universal Social Charge) | Employee | 0.5%–8% depending on income |
As the employer, your direct tax cost is the Employer PRSI — currently 11.15% on gross salary. Budget for this on top of every gross salary figure.
You must register with Revenue before you process your first payroll. This is done through Revenue Online Service (ROS). Many founders do this at the same time they register a company in Ireland .
The R&D Tax Credit allows Irish companies to claim a 35% credit (increased from 25% in 2024) on qualifying research and development expenditure — including staff costs, materials, and certain contractor costs.
This is a credit, not a deduction — meaning it reduces your actual tax bill by 35 cents for every €1 of qualifying spend, not just your taxable income.
Here’s what makes this genuinely powerful for early-stage startups: you don’t need to be profitable to benefit.
If your R&D credit exceeds your corporation tax liability, you can claim the excess as a cash refund from Revenue, payable over 3 years. This means a pre-revenue deep-tech or AI startup can receive real cash back from the Irish government based on its technical payroll — even before it makes a single euro in profit.
Example:
For Indian, US, or UK founders in AI, biotech, fintech, or SaaS using Ireland as their EU base, this is one of the strongest incentives in Europe.
Routine software maintenance, standard business analytics, or copying existing solutions do not qualify.
Early-stage companies often can’t compete on salary with larger employers. The Key Employee Engagement Programme (KEEP) lets you grant share options to employees in a tax-efficient way.
Without KEEP, employees who exercise share options pay income tax (up to 40%) on the gain at the point of exercise. Under KEEP, that tax is deferred until the employee sells the shares, and taxed as Capital Gains Tax (CGT) at 33% — not income tax.
The saving: Up to 7% in USC and PRSI, and potentially a large income vs CGT rate differential.
This makes KEEP one of the most effective ways to attract and retain talent in an early-stage Irish company without burning cash on salaries. [Contact Abbey Blue Formations to discuss post-incorporation structure →]
The Start-Up Companies Relief (Section 486C) allows newly incorporated companies to claim full corporation tax relief on trading income in their first three years of trading, subject to a cap linked to employer PRSI paid.
For most early startups, this means zero corporation tax in years 1–3, provided the PRSI cap is met. Combined with the R&D Tax Credit, a well-structured Irish startup can have a near-zero effective tax burden in its early years.
After your company is incorporated with the Companies Registration Office (CRO), you need to register separately with Revenue. This is a different process.
| Registration | When Required |
| Corporation Tax | Immediately on incorporation |
| Employer PAYE/PRSI | Before your first payroll |
| VAT | When you cross the threshold (or voluntarily) |
| RCT (Relevant Contracts Tax) | If operating in construction |
Learn how to register a company for tax in Ireland — our team handles this as part of all full-setup packages.
| Tax | Rate | Notes |
| Corporation Tax (trading) | 12.50% | Lowest in EU for trading income |
| Corporation Tax (non-trading) | 25% | Investment, rental income |
| VAT (standard) | 23% | Above €40k–€80k threshold |
| Employer PRSI | 11.15% | On gross salary |
| R&D Tax Credit | 35% | Cash refund available |
| Capital Gains Tax | 33% | On disposal of assets/shares |
| Dividend Withholding Tax | 25% | Exemptions apply for EU companies |
12.5% on trading income — one of the lowest rates in the EU. Non-trading income (investments, royalties) is taxed at 25%.
Only if the company makes a profit. Loss-making companies owe zero corporation tax. The Startup Companies Relief can also reduce the liability to zero in the first three years.
Yes. The R&D Tax Credit applies to the Irish company, not the director personally. Where your directors are based is irrelevant to claiming this credit. Learn more about company formation Ireland for non-residents
After incorporation, you register with Revenue through ROS (Revenue Online Service). Abbey Blue Formations handles this step for you as part of our full formation packages. [See what’s included in our packages
The CRO (Companies Registration Office) handles your company’s legal existence — the Certificate of Incorporation, annual returns, and director filings. Revenue handles your tax obligations — corporation tax, VAT, and payroll. Both registrations are required.
Starting a company in Ireland and want to get the structure right from day one? Book a free consultation with Abbey Blue Formations — we’ll handle incorporation, tax registration, and point you toward the reliefs you qualify for.
Register Your Irish Company Today
Fully remote. 3–5 business days.
