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Criteria to Obtain 12.5% Corporation Tax Rate

There are currently two Corporation Tax rates in Ireland. 12.5% for trading income and 25% for passive and foreign income. The 12.5% tax rate is not an automatic entitlement. An Irish resident company which does not have a business in Ireland is taxed as if all its income is foreign income and hence the rate applicable is 25%.

In order for the company to be deemed Irish tax resident it must be controlled from Ireland (the company’s central management). The place of incorporation has little bearing on the determination of the residence of a company.

Factors to be taken into account in establishing where the company's central management and control lie include, for example, where the important questions of company policy are determined, where the majority of directors reside, where board meetings are held, where the books and records are located, where the negotiation of major contracts is undertaken and where the company's head office is located.

Other areas to consider in deciding if the company can avail of the 12.5% rate are:

  • The company engages Irish based employees to carry out the work of the company
  • The activities of the company in Ireland add value
  • The company has a premises from which it operates in Ireland

It is therefore essential to ensure that a company has a real presence in Ireland to ensure it can avail of the 12.5% rate.