Being part of a limited company will not automatically cause you or your partner to pay more tax.
This guide lays out the tax implications and practical steps you need to know before registering a new company in Ireland. Read it in order. Follow the steps. Keep it simple.
Ireland is a great place to start a business, known for its attractive corporate tax environment. But what does that really mean for your day-to-day operations and compliance?
We break down the essentials simply.
When you start, you usually pick one of two main business types: a Sole Trader or a Limited Company. The one you choose has a big impact on how much tax you pay.
✔️ Your business income, after expenses, is calculated as personal income.
✔️ This is taxed at personal income tax rates.
✔️ Once the company is registered, you have to deal with two types of taxes. One is Corporation Tax, and the other is Value Added Tax (VAT).
✔️ Corporation Tax is mandatory. Your company’s profits are generally taxed at the rate of 12.5%.
✔️ VAT is only required when your business’s yearly turnover exceeds the set thresholds (€42,500 for services and €85,000 for goods).
✔️ If your turnover is below this, VAT is optional, though sometimes beneficial if you have high setup costs to reclaim.
✔️ VAT applies to most goods and services in Ireland, with a standard rate of 23% and lower rates for specific items.
✔️ You are a Director of a Limited Company, and you have a monthly job, then the income remains subject to the standard PAYE system.
✔️ Also, if you draw a monthly salary from your own company, that income also remains subject to the standard PAYE system, just like a regular job.
✔️ If you own more than 15% of the company shares and a Directorship, Revenue classifies you as a “Proprietary Director”.
✔️ Currently, as an employee, you likely use Form 12. Now you will change to Form 11, which is mandatory irrespective of the previous year and the current year.
✔️ So, we will be filing your taxes once the company is registered.
So overall, your personal tax filing changes from Form 12 to Form 11. Your Company profits will be taxed at 12.5% (after your salary and expenses). For your spouse, there is no direct increase in her tax; joint assessment benefits remain.
Ireland is a very appealing country for business formation, not just for multinationals but also for local startups. A major part of this appeal is the low Corporation Tax rate. The key tax rates are:
✔️ 12.5% on trading profits (the income from selling your goods or services). This is one of the lowest in the EU.
✔️ Other passive incomes are taxed at 25%.
💡 Ireland offers ways for businesses to reduce their tax bill even further, particularly if you are investing in growth and innovation.
If you choose a Limited Company, you have ongoing legal requirements you must meet to stay in good standing and avoid fines. These are known as Statutory Obligations.
✔️ You must file an annual return with the Companies Registration Office (CRO) every year. This updates the public record with details of your directors, secretary, and registered office.
✔️ Corporation tax returns have to be filed with the Revenue within nine months of your company’s financial year-end.
✔️ A new company must register for Corporation Tax with Revenue within one month of starting to trade
✔️ You must register for VAT before you exceed the set turnover thresholds.
✔️ If you plan to hire staff, you must register for Pay As You Earn (PAYE) to manage income tax and social insurance deductions. This also requires you to follow employment laws for contracts, safety, and pension auto-enrolment.
Choosing the right structure is the first and most important financial decision you make. Getting it wrong can cost you thousands in unnecessary tax.
Ready to start your company or need clarity on your tax position?
Call us today for a simple, no-pressure chat about your startup or small business. We can handle your full company formation and all ongoing compliance, making sure you benefit from Ireland’s tax advantages right from the start.
📞TALK TO OUR ACCOUNTING EXPERTS RIGHT NOW | Call us at (087) 225 7706, 01 960 9191, 01 441 6919, or email us at Info@tascaccountants.com for any assistance.
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