Before the taxman comes calling, it’s important to know what you’re actually responsible for and what you’re not. That’s why we’re breaking it down for you so you never have to worry about losing funds when it comes to your business’ tax bill.

Valued Added Tax (VAT)

In Ireland, you’re required to register for VAT once your business turnover exceeds – or is likely to exceed – certain thresholds. These are as follows:

• €41,000 for acquisitions from other EU member states;
• €10,000 for internet sales or mail order and cross-border telecommunications, broadcasting and electronic services;
• €37,500 for supplies of services only;
• €75,000 for supply of goods only;
• €75,000 for supplying both goods and services where 90% or more of the turnover is from the supply of goods – however there are additional conditions attached to this.

A business that’s not established in Ireland, needs to register for VAT if it supplies taxable goods or services to ‘taxable customers’ in Ireland. This applies regardless of turnover levels.

What about registering when none of the above apply? You can still elect to register for VAT. This facilitates the reclaim of VAT paid on goods and services purchased by the business.

Charging rates of VAT? This will depend on the nature of the goods or services supplied. There are a few VAT rates which you should know about:

• standard rate of 23% – applies to most goods and services;
• first reduced rate of 13.5% – applies to fuel, electricity, vet fees, construction, arts and theatre tickets, cleaning services, catering and restaurant services. Note: from 1^st May 2022 home fuel costs will be reduced to 9%;
• second reduced rate of 9% – applies to newspapers, electronically supplied publications, sporting activities’ facilities. From time to time hospitality services have also fallen under this rate;
• super-reduced rate of 4.8% – applies to livestock;
• zero rated – applies to all exports, some foodstuffs, books, children’s’ clothes and shoes and disability aids.

We know it can seem complicated and overwhelming so if you’re not sure what rate applies to your goods or services, check it here.

Failure to register for VAT can result in the Revenue deeming that your sales were VAT inclusive and requiring you to pay up to 23% on your net (VAT exclusive) turnover so it’s well worth ensuring that you register on time and charge the appropriate rate!

Payroll Taxes

If you’re a business employing people, you’ll need to register as an employer with the Revenue. This means you’ll be required to deduct Universal Social Charge (USC), Pay as you Earn (PAYE), Pay Related Social Insurance (PRSI) and – if requested to do so – Local Property Tax (LPT), from your employee’s salary and /or wages. Details of the gross pay and related taxes are required to be submitted to the Revenue before making any payment to staff on a weekly/monthly/quarterly basis.

Relevant Contract Tax

Leading the charge in the construction, forestry or meat processing industries? You’ll be required to account for Relevant Contracts Tax (RCT).

What does this mean? Well, RCT is a withholding tax that applies to payments by principal contractors to subcontractors in the relevant industries. The rates of tax are 0%, 20% and 35%.

There are specific activities within each industry that’ll have to answer to this tax format so, you should seek clarification before you decide whether it applies to your business.

Where RCT applies the principal contractor is required to:

• notify the Revenue of all relevant contracts and payment details;
• provide details to subcontractors of the tax which will be deducted from their payment based on the information provided by the Revenue;
• submit a deduction summary to Revenue (monthly/quarterly);
• Pay deducted RCT to the Revenue.

The subcontractor raising an invoice to a principal contractor shouldn’t charge VAT but needs to include the following statement on their invoice:

“VAT to be accounted for by the principal contractor under the reverse charge mechanism”.

Income Tax

If you’re operating as a partnership or sole trader you will be required to file an annual partnership return and/or income tax return by October of the year following your business year end.  Preliminary tax for the current year must be paid by the end of October along with any underpayment relating to the previous year.

Corporation Tax

Irish resident and non-resident companies who trade in Ireland, pay corporation tax on the taxable profits they make (with some exceptions).

In this case, here’s some things to note on what a company must do:

• calculate and pay preliminary by the specified due date (usually the 23^rd of the calendar month before the year-end). A small company (CT liability of less than €200k in the previous accounting period) may base its preliminary tax on the lower of 100% of their liability for the previous period or 90% of their liability for the current period;
• Complete and file a corporation Tax 1 Form and a 46G Form (return of payments in excess of €6,000) by the filing date;
• Pay any balance of tax due by the filing date;
• The return and related tax is due by the 23^rd of the ninth month after the accounting period end;
• Interest is charged on late payment of these taxes.

Dividend With-Holding Tax (DWT)

Where a limited company makes a dividend payment or other distribution, they’re required to retain Dividend Withholding Tax (DWT) of 25%.

This does not apply where an Irish resident company makes a distribution to another Irish resident company of which it is a 51% subsidiary, but be aware certain conditions apply.

Resident and non-resident shareholders can obtain a DWT exemption declaration form – in this instance, the company is not required to deduct DWT.

DWT must be notified to the Revenue in a return for the month in which the payments were made.  The deadline for filing and paying is the 14^th of the following month. A return must be filed whether DWT was deducted or not.

Exemptions from DWT? Qualifying Irish resident persons/entities (excluded persons) are entitled to this. If you’re an excluded person you must claim the exemption. Certain non-residents may also be able to claim this.

Capital Gains Tax (CGT)

A business can make a capital gain from selling or transferring an asset. Any capital gain will be subject to tax at the rate of Capital Gains Tax (currently 33%).

A Capital Gains Tax return for an individual (sole trader/partnership) must be filed by 31^st October of the following year. However, the tax must be paid in the year of the disposal.

For a limited company, the CGT on development land will be returned under this tax’s rules, however gains on other assets will be incorporated in the CT return filing.

Struggling to get to grips with things? Don’t bear the burden alone – reach out to us and let’s see how we can navigate the world of tax together!