Corporation Tax In Ireland

Corporation Tax in IrelandCorporation Tax In Ireland

In certain circumstances, new start up companies can qualify for 0 percent corporation tax in Ireland. Section 34 of the Finance Act 2011 provides for the extension of a 3-year tax relief. The scheme which provides relief from corporation tax on the trading income and certain gains of new start-up companies in the first 3 years of trading was extended to include start-up companies which commence  trade up to 2014.

The purpose of section 486C is to encourage new business activity in the traded sector of the Irish economy. The Section also modifies the existing relief so that the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period, subject to a maximum of €5,000 per employee and an overall limit of €40,000. Credit is also given for any employers’ PRSI exempted under the Employer Job (PRSI) Incentive Scheme in respect of a company’s employees in determining the amount of corporation tax relief available to the company. The purpose of these changes is to better target the relief at start-up companies generating employment.

The Finance Act changes mean that where the total corporation tax payable by a qualifying start-up company for an accounting period does not exceed €40,000, the aggregate amount of corporation tax referable to income and gains of the qualifying trade in that period will be reduced to nil or, if greater, to that aggregate as reduced by the amount of qualifying Employers’ PRSI.

Where the total corporation tax payable exceeds €40,000 but does not exceed €60,000, the aggregate amount of corporation tax referable to income and gains of the qualifying trade will be reduced to an amount as calculated in accordance with the existing marginal relief formula or, if greater, to that aggregate as reduced by the amount of qualifying Employers’ PRSI. For accounting periods of less than 12 months, the various limits are proportionately reduced.

To ensure that the scheme is focused appropriately on new business activities, the section contains a provision which excludes from relief, a trade set up by a new company, the activities of which, if carried on a by an associated company of the new company, would form part of an existing trade carried on by that associated company.

To review the statute book click HERE. If you have any questions on this section of the act, please consult a qualified financial advisor.