Corporation Tax is charged on all profits wherever arising, of companies resident in the State and non-resident companies who trade in the State through a branch or agency.
How is a Company Taxed?
Companies pay Corporation Tax. This tax is charged on the company’s profits which include both income and chargeable gains. A company’s income for tax purposes is calculated in accordance with Income Tax rules. Chargeable gains are calculated in accordance with Capital Gains Tax rules.
What is the rate of Corporation Tax?
There are two rates of Corporation Tax:
- The first rate is 12.5% for trading income unless the income is from an excepted trade in which case the rate is 25%
- The second rate is 25% for non-trading income (e.g. investment income, rental income)
What is Corporation Tax charged on?
Corporation Tax is charged on all profits wherever arising, of the companies.
Basis of Assessment
- Corporation Tax is assessed on the profits of a company’s accounting period at the relevant Corporation Tax rate in force during that accounting period.
- Where the rate of Corporation Tax changes during an accounting period, the profits of that period are apportioned on a time basis and taxed at the appropriate rate for the purpose.
An accounting period for tax purposes is a period of not more than twelve months and is usually the period for which the company makes up its annual accounts.
Paying Corporation Tax & Filing Obligations
The Self-Assessment system ‘Pay & File’ applies to companies. The obligations of a company with regard to paying Corporation Tax and filing its return are as follows:
- Compute and pay its preliminary tax liability by the specified date.
- Complete and file, online, a Form CT1 and where applicable a Form 46G.
- Payonline any balance of tax due when lodging the return i.e. within nine months of the end of the accounting period, subject to the 21/23 day rule. (The specified return date and payment due date is the 21st day of the applicable month. This date is extended to the 23rd of the applicable month for companies who file their return and pay any associated tax due via Revenue’s Online Service (ROS)).
Preliminary Corporation Tax
- A company is obliged to pay to the Collector General through ROS, the amount of preliminary tax appropriate to the accounting period.
- The total amount of preliminary tax paid must be equal to or greater than 90% of the company’s final liability for the accounting period.
- Special provision is made for small companies whose liability does not exceed €200,000 in the preceding chargeable period.
A small company is a company whose Corporation Tax liability in the preceding accounting period does not exceed €200,000. A company such as this has the option of basing its preliminary tax on the corresponding Corporation Tax liability for the preceding accounting period.
New or Start-up companies
New or Start-up companies with a Corporation Tax liability of €200,000 or less for their first accounting period will not be required to pay Preliminary Tax in respect of that first accounting period and will instead be required to pay their final Corporation Tax liability for that accounting period at the same time as they are required to submit their Corporation Tax return, i.e. within nine months after the end of the accounting period, subject to the 21/23 day rule referred to above.
When is Preliminary Corporation Tax due?
- For companies with a tax liability not exceeding €200,000 preliminary tax is payable in one instalment 31 days before the end of the accounting period, subject to the 21/23 day rule referred to above.
- The new arrangements provides for payment of preliminary tax by large companies in two instalments.
- The first instalment will be payable in the 6th month of the accounting period and the amount payable will be 50% of the corporation tax liability for the preceding accounting period or 45% of the corporation tax liability for the current accounting period.
- The second instalment will be payable in the 11th month of the accounting period and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.
- The revised arrangements apply generally where the accounting period is more than 7 months in length (for shorter accounting periods, preliminary tax of 90% of tax liability is payable in one instalment as before)
Large companies [companies with a Corporation Tax liability exceeding €200,000 in their previous year].
In order to minimise the interest charges that would otherwise arise for large companies if their preliminary tax payments fell short of 90%, notional allocation of preliminary tax payments between group members for the purposes of assessing the adequacy of preliminary tax payments made by the group for interest charges purposes is now permissible. It is important to note, however, that for such aggregation to take place the claimant company must pay 100% of its Corporation Tax liability by its return filing date.