Corporation Tax in Ireland for Small Companies: Rates, Payments and Reliefs
Corporation tax Ireland explained for small companies: 12.5% and 25% rates, how profit is taxed, preliminary tax, CT1 deadlines and start-up relief.
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- Abbey Blue Formations
- Published
- Reading time
- 7 min read
Most new directors know one number about corporation tax Ireland: 12.5%. It is a good headline, but not the whole story. The rate depends on the type of income, the timing depends on the size of your bill, and a start-up relief can reduce it in your first years.
This guide covers how a small Irish company is taxed, from the rates to preliminary tax, the CT1 return and the records that make it painless.
Corporation tax Ireland: the rates for small companies
There are two main rates, depending on the kind of income.
12.5% applies to trading income. This is profit from actively carrying on a business: selling products, providing consultancy, running a café, operating an online shop.
25% applies to non-trading income, such as rental income and investment income, and to income from certain "excepted trades" (for example, some dealing in and developing land).
So the 12.5% corporation tax rate is not automatic. A company that simply holds a property and collects rent will generally pay 25% on that rental profit, and a company with mixed income may pay both rates.
The 15% minimum rate you may have read about applies to very large multinational groups, so the corporation tax rate Ireland sets for small trading companies remains 12.5%.
If you are weighing up whether to incorporate at all, our comparison of sole trader vs limited company in Ireland shows how company rates compare with personal income tax.
How your company's profit is taxed
Corporation tax is charged on the profits of an accounting period of up to 12 months. In broad terms:
- 1Start with your income for the period.
- 2Deduct allowable business expenses (wages, rent, insurance, software, accountancy fees and so on).
- 3Adjust for items that are treated differently for tax, such as depreciation, which is replaced by capital allowances on qualifying equipment.
- 4Apply the correct rate to the taxable profit.
A simple worked example
Say your company has trading income of €150,000 and allowable costs of €110,000. Taxable trading profit is €40,000. At 12.5%, the corporation tax is €5,000.
This is the logic behind any corporation tax calculator Ireland tool. The hard part is not the maths; it is knowing which costs are allowable and having the figures to hand.
What you pay yourself also affects profit: salary is deductible for the company but taxed on you personally. Our guide to paying yourself from a limited company covers the options.
Preliminary tax: paying before the year ends
Companies pay corporation tax in advance, known as preliminary tax. For a "small" company, which Revenue defines as one whose corporation tax for the previous accounting period was not above €200,000, the rules are fairly relaxed:
- You pay one instalment, due 31 days before the end of your accounting period, and on or before the 23rd of that month.
- The amount must be the lower of 100% of the previous period's liability or 90% of the current period's liability.
Your first accounting period
A new company whose corporation tax is less than €200,000 does not pay preliminary tax for its first accounting period. It pays the full amount with its first return, so the bill arrives in one lump. Set money aside as you go.
The CT1 return and payment deadline
Every company must file a corporation tax return, the CT1, and pay any balance due on or before the 23rd day of the ninth month after the end of its accounting period. Returns and payments must be made through the Revenue Online Service (ROS).
Filing late is expensive. A surcharge of 5% of the tax due (capped at €12,695) applies if you file within two months of the deadline, rising to 10% (capped at €63,485) after that. Late filers can also lose access to certain reliefs, including loss relief and group relief.
For a month-by-month view of the dates, see our CT1 corporation tax deadline calendar.
Start-up relief for new companies
New companies that begin a qualifying trade may be able to reduce their corporation tax for their first five years of trading under Section 486C relief.
- Full relief is available where the total corporation tax for the year is €40,000 or less.
- Marginal relief applies where it is between €40,000 and €60,000.
- The relief is linked to the employer PRSI your company pays, subject to a maximum of €5,000 per employee or director, so a company with no PRSI-paying staff may get little or no benefit.
Our guide to SURE and Section 486C start-up relief explains who qualifies and how to claim.
Keeping it simple with good bookkeeping
Most corporation tax problems for small companies are really record-keeping problems: missing invoices, mixed personal and business spending, or accounts rushed before the CT1 deadline.
Monthly bookkeeping means you always know your profit to date, can estimate preliminary tax with confidence and claim every allowable expense. Our fully online bookkeeping and accounting packages are designed for exactly this, so year-end becomes routine rather than a scramble.
Frequently Asked Questions
What is the corporation tax rate for a small company in Ireland?
The standard corporation tax rate Ireland applies to trading profits is 12.5%, whatever the size of the company. Non-trading income, such as rent and investment income, and income from certain excepted trades are taxed at 25%. Many small companies only ever pay the 12.5% rate, but if your company holds property or investments, part of its profit may fall into the higher band.
Does every company qualify for 12.5% corporation tax?
No. The 12.5% corporation tax rate applies only to trading income. A company that simply holds assets, collects rent or earns investment returns will generally pay 25% on that income. The distinction depends on what the company actually does, so take advice if your activities are mixed.
Does a new company pay preliminary tax in its first year?
Not if its corporation tax for the first accounting period is less than €200,000. In that case, the company pays the full liability when it files its first CT1 return, on or before the 23rd day of the ninth month after the period ends. Set money aside monthly so the bill is no surprise.
Is there a corporation tax calculator Ireland companies can use?
You can estimate your bill yourself: take income, deduct allowable costs, adjust for items such as capital allowances and apply the right rate. A corporation tax calculator Ireland estimate is only as good as your figures, though. Up-to-date bookkeeping gives you an accurate profit figure throughout the year, which makes preliminary tax planning far easier.
What happens if I file my CT1 late?
Revenue applies a surcharge of 5% of the tax due (capped at €12,695) if the return is up to two months late, and 10% (capped at €63,485) beyond that. Late filing can also restrict reliefs such as loss relief and group relief, so file on time.
Set up your company and your books properly
Understanding corporation tax Ireland rules is much easier when your company is set up correctly and your books are kept month by month. We handle company formation, tax registration and fully online bookkeeping in one place. Click here to use our free Formation Calculator and see exactly what your setup will cost.