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Corporation Tax
Rates
| 2009 |
| € |
Trading Income | 12.5% |
Income from sale of development land for residential purposes | 25% |
Manufacturing/IFSC/Shannon Rate (applies until 31 December 2002) | 10% |
Non Trading Income (including land dealing – except as above) | 25% |
The special 20% rate applied to the trading profits from dealing in or developing residential development land is being abolished. The income will be charged at the persons relevant marginal rates of income tax or the 25% rate of corporation tax. This change will apply as regards Income Tax for the year of assesment 2009 and subsequent years and regards corporation tax for accounting periods ending on or afetr 1st January 2009.
Where trading losses have been incurred, from dealing in or developing residential development land in circumstances where, if trading profits have been made, they would have been eligible to be taxed at 20%, and a claim to use those losses has not been made to and recieved by the revenue commissioners before the 7th April 2009, the losses from today will generally only be relievable (on a value basis) up to a maximum of 20%. Where any such loss is a terminal loss, the restriction will be implemented "ring-fencing" the loss.
Preliminary Tax Payment dates for Large Companies
Companies with a corporation tax liability of more than €200,000 in their previous accounting period are obliged to pay preliminary corporation tax, amounting to 90% of the final liability for the current accounting period, one month before the end of the current accounting period (but not later than the 21st of the relevant month). The current single payment for such companies’ preliminary corporation tax will now be due in two instalments. This will apply to accounting periods commencing on or after 14 October 2008.
The first instalment will be payable in the 6th month of the accounting period (i.e. 21 June for a company with calendar year accounts) and the amount payable will be 50% of the corporation tax liability in the preceding accounting period or 45% of the corporation tax liability for the current accounting period.
The second instalment will be payable (as at present) in the 11th month of the accounting period (i.e. 21 November for a company with calendar year accounts) and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.
Tax Credit scheme for Research and Development Expenditure
The current 20% rate of tax credit for incremental expenditure undertaken by a company on qualifying research and development (R&D) is being increased to 25%. This will apply to accounting periods commencing on or after 1 January 2009.
3 Year tax exemption for Start-up Companies
New start-up companies which commence trading in 2009 will be exempt from corporation tax and capital gains tax in each of the first 3 years provided that their tax liability in the year does not exceed €40,000.
This measure is being examined to ensure that it is in compliance with EU rules on State-Aid. Further details of this incentive will be contained in the Finance Bill.
Close Companies
- Most Irish resident companies are what are called 'close' companies.
- A Close Company is a company that is controlled by five or fewer participators or is controlled by any number of participators who are directors.
- The definition of a Close Company includes a company where, on distribution of its full income, more than 50% goes to five or fewer participators or participators who are directors.
- A participator is a person having an interest in the income or capital of the company.
Close Company provisions
The Close Company provisions set out in the Taxes Consolidation Act 1997 have four main implications for a company and its participators/directors.
- Certain benefits-in-kind and expense payments to participators or associates will be treated as distributions.
- Interest in excess of a specified rate paid to directors or their associates will be treated as distributions.
- Loans to participators or their associates must be made under deduction of tax and, if the loan is forgiven, the grossed-up amount is treated as income in the hands of the recipient.
- A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Close "service" companies are also liable to a surcharge of 15% on one-half of their undistributed trading income.
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 the 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.
Accounting Period
An accounting period for tax purposes is a period of not more than twelve months and is normally the period for which the company makes up its annual accounts.
Should you require any further information, please contact Susan Lennon.
Email: slennon@annebrady.ie
