Irish Corporation Tax Explained: A Guide for SMEs
If you own a limited company in Ireland, understanding Corporation Tax is essential. It might sound complicated, but once you break it down, it’s just about paying tax on your business profits on time, and staying compliant with Irish tax laws.
This guide removes the jargon and keeps it simple. We’ll cover:
- What is Corporation Tax?
- Who needs to pay Corporation Tax?
- How much Corporation Tax do you pay?
- How do I register for Corporation Tax?
- What is a CT1?
- When is the Corporation Tax deadline?
- What happens if you miss the CT1 deadline?
- What if my company makes a loss?
- Preliminary Corporation Tax
- A note on Corporation Tax versus Income Tax
What is Corporation Tax?
Corporation Tax is a tax that businesses must pay on their profits. In Ireland, companies pay this tax to the Revenue Commissioners, the government body responsible for tax collection.
For businesses, corporation Tax applies to income earned from selling goods or services, investments, and any other sources of profit. If a company makes money, a portion must be paid as tax, just like individuals pay income tax on their earnings. Irish local businesses and major multinational companies alike must file their tax returns and pay the required amount.
Who needs to pay Corporation Tax?
Corporation Tax applies to all limited companies in Ireland. Even if a company hasn’t traded or earned money, you must still file your tax return.
However, sole traders do not pay Corporation Tax. Instead, they pay income tax on their earnings. Also, non-resident companies only pay tax on profits made in Ireland.
Filing tax returns ensures:
- The business stays compliant with tax laws.
- The Revenue Commissioners have accurate records.
- The company avoids fines or penalties for non-compliance.
How much Corporation Tax do you pay?
Corporation Tax applies to businesses of all sizes, but the way it's calculated and paid can vary depending on the type of company. Here's a breakdown of how it works for different businesses in Ireland:
1. SMEs & large Irish Businesses
For SMEs & large limited companies, Corporation Tax applies only to profits. At the standard 12.5% rate, this means if your company earns €100,000 in profit, you will pay €12,500 in tax.
2. Large Multinationals
Big multinational companies, particularly those in the tech, pharmaceutical, and finance sectors, often pay Corporation Tax in multiple countries. Since 2023, companies with global revenues above €750 million must pay a minimum 15% tax.
3. Non-trading income
Non-trading income includes things like rental income, investment income, and passive income. This income is taxed at a higher Corporation Tax rate of 25%. This is different from the 12.5% rate that applies to trading income, which comes from a company’s core business activities.
Some exceptions exist, such as certain foreign dividend income, which may qualify for the lower 12.5% rate depending on specific conditions.
4. Close company surcharge
This is an extra tax applied to certain Irish companies that are controlled by a small number of people—usually five or fewer shareholders. The surcharge is designed to prevent companies from holding onto profits instead of distributing them to shareholders, which would otherwise be taxed at personal income tax rates.
How do I register for Corporation Tax?
If you own a limited company, you must register for Corporation Tax with Revenue. This is separate to registering your company with the Companies Registration Office (CRO).
Steps to Register:
- Go to Revenue Online Service (ROS)
- Fill in the TR2 form
- Submit the form through ROS
- Receive your Corporation Tax registration number from Revenue.
In Ireland, once a company is registered with the Companies Registration Office, it has a legal obligation to file annual tax returns with the Revenue Commissioners, even if it didn't trade or make any profits during the year.
What is a CT1?
A Form CT1 is the Corporation Tax return form that companies in Ireland must file with the Revenue Commissioners. It includes details of a company's taxable profits, deductions, and the amount of tax owed. Businesses must submit this form electronically through the Revenue Online Service (ROS).
Other types of returns that companies need to file:
- Annual Accounts for Companies Registration Office (CRO): These financial statements show whether the business made a profit or loss for the relevant period.
- Other Filings: If your company is registered for VAT or employs staff, additional returns will be required such as VAT Returns and Payroll Returns.
- Directors Tax Returns: Any directors of the company will still need to file their own personal tax returns (Form 11) similar to sole traders.
When is the Corporation Tax deadline?
Unlike Form 11 Tax Returns that all sole traders file by a certain date, the CT1 return deadline can be different for each company.
The Corporation Tax CT1 deadline is nine months after the company year-end, filed no later than the 23rd day of that month.
Example:
If your company’s financial year-end is 31st December, your Corporation Tax return is due by 23rd September the following year.
What does “year-end” mean?
A company’s financial year-end is the last day of its financial year.
A company’s financial year (also often called the accounting period or trading period) is the period that a business uses for financial reporting and tax purposes.
The year-end determines:
- The Corporation Tax accounting period, which is usually aligned to the financial year. As outlined above companies need to file their CT1 tax return within nine months of the company year-end. This will detail the company’s taxable profits, deductions, and the amount of tax owed for the previous financial year.
- The deadline for filing annual financial statements with the CRO. After the year-end companies file their annual return with the Companies Registration Office (CRO), which includes financial statements covering the last financial year. This needs to be submitted within 56 days of the Annual Return Date (ARD). The ARD is usually around the same time as the Corporation Tax due date.
In Ireland, companies have some flexibility when choosing their financial year but there are strict rules they must follow:
- The first financial year must not exceed 18 months from incorporation. (Note: if a start-up extends their first financial year up to 18 months this may result in two CT1 tax return periods in the first financial year instead of one.)
- Each subsequent financial year should be close to 12 months, with only minor variations allowed.
- Businesses can change their financial year-end by filing a Form B83 with the CRO, but only once every five years (unless part of a corporate group).
For simplicity a lot of companies choose the calendar year as their financial year, so their year-end is 31st December.
What happens if you miss the CT1 deadline?
- Revenue will charge late filing penalties
- Revenue will also charge daily interest on unpaid tax
- You are at higher risk of being chosen for a Revenue audit
What if my company makes a loss?
If a company in Ireland makes a loss during its financial year, it can use that loss to reduce its Corporation Tax liability in several ways:
1. Carrying Forward Losses
- If the company cannot use the loss immediately, it can carry it forward indefinitely and offset it against future profits from the same trade.
- The loss must be used against the first available profits in future years.
2. Carrying Back Losses
- A company can carry back trading losses to the previous accounting period and offset them against profits from that period.
- This can result in a tax refund if the company had paid Corporation Tax in the previous year.
3. Offsetting Against Non-Trading Income
- If a company has non-trading income (such as rental or investment income), it can offset trading losses on a value basis.
- This means the loss is applied at the 12.5% Corporation Tax rate, rather than the full amount.
4. Offsetting Against Current Profits
- If a company has more than one trade, other trading income in the same accounting period can offset the loss against those profits, reducing the amount.
- Losses are deducted on a euro-for-euro basis, meaning a €10,000 loss on one trade can offset €10,000 of taxable profit on another.
Preliminary Corporation Tax
Preliminary tax is a prepayment of your Corporation Tax for the current financial year. Instead of paying tax all at once, businesses pay in advance based on their estimated profits.
Who needs to pay Preliminary Tax?
All limited companies need to pay Preliminary Corporation Tax. However, a newly formed company does not need to pay preliminary tax in the first year.
SME companies (companies with a Corporation Tax bill under €200,000 last year) must pay:
- 100% of last year’s tax bill, or
- 90% of estimated tax for the current year.
What is the Preliminary Tax Deadline?
Example:
If your company’s year-end is December 31st 2025, your preliminary tax payment is due by November 23rd 2025.
A note on Corporation Tax versus Income Tax
Some business owners in Ireland prefer to pay Corporation Tax instead of income tax because it usually means paying less tax over to revenue on your annual business profits.
Companies pay 12.5% tax on their trading profits, whereas individuals can pay up to 40% income tax, plus other charges like Universal Social Charge (USC) and PRSI. This can bring the total tax payable as a sole trader up to 52%.
Instead of paying high personal tax rates, business owners can leave money in the company, reinvest it, or pay themselves in more tax-efficient ways. This setup makes limited companies attractive for businesses because it allows them to grow while keeping tax bills manageable.
This is one of the main reasons that sole traders may consider going limited.
Ireland has a low corporate tax rate, which has made it a popular place for big international companies—especially from the United States—to set up their businesses. For years, Ireland kept this tax at 12.5%, making it one of the lowest in Europe. Recently, international rules have changed, and large companies now have to pay at least 15%, which affects how businesses operate here.
A huge part of Ireland’s tax income comes from big US companies, particularly in technology and pharmaceuticals. These companies provide about three-quarters of Ireland’s corporate tax revenue, roughly €20 billion, which helps fund schools and hospitals. However, Ireland depends heavily on these companies, so if they ever decide to leave or change how they do business, it could impact the economy.
We can help
Navigating Corporation Tax is an essential part of running a successful business in Ireland. While some business owners manage their own bookkeeping, CT1 returns etc. most outsource to an accountant. Limited company compliance requirements are significantly more complex than a sole trader’s tax obligations, so while you may have managed your own accounts as a sole trader, once you move to a limited company it may be time to appoint an accountant. At TaxAssist Accountants we offer a full accountancy service for Limited Companies. Find out more and book an initial consultation to get a quote here.
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Or contact usLast updated: 28th May 2025