TAX MATTERS
Tax Obligations of a Business Owner
Let's Register Your Company
Documents Required
Cost Details
Duration
This guide explains the main tax obligations of an Irish business owner.
The important point is that there is no single “business owner tax rate.”
Your overall tax position depends on
- What your company earns
- What it spends
- Whether it is VAT registered
- How you take money from the company, etc.
Tax obligations depend on whether you operate as a sole trader or through a limited company.
Sole Trader Tax
Once you register as a sole trader, your personal income is business income minus business expenses.
- You have to pay Income Tax, USC & PRSI on that.
For 2026, Revenue's standard Income Tax bands include 20% and 40%, with the applicable band depending on personal circumstances.
For example, a single person without qualifying children has a €44,000 standard-rate band, while different bands apply to married couples/civil partners and certain other categories.
Revenue lists the standard USC rates as:
- First €12,012 0.5%
- Next €16,688 2%
- Next €41,344 3%
- Balance 8%
PRSI is another area where the exact treatment depends on the person's circumstances and employment status.
For employees covered by Class A, the rates differ depending on earnings.
Certain self-employed people and certain company directors fall under Class S.
The Class S rate is 4.2% up to 30 September 2026 and 4.35% from 1 October 2026, subject to the applicable rules and minimum contribution.
Limited Company Tax
Once the company is registered, you need to register for taxes with the Revenue Commissioners.
You have to pay:
- Tax on the company's taxable profits (Corporation Tax).
- VAT on taxable supplies when VAT registration applies.
Corporation Tax
Once the company is registered, you have to pay corporation tax:
- 12.5% on taxable profit/trading income
- 25% on non-trading income
What is taxable profit?
Suppose your company receives €50,000 in sales during the year.
It would be incorrect to immediately calculate €50,000 × 12.5% = €6,250 as corporation tax.
Why? Because €50,000 may be your turnover, not your taxable profit.
It is your turnover minus business expenses.
What is non-trading income?
Non-trading income is income a company receives outside normal business trading activities.
It is income that is not earned from selling goods or providing services as part of a trade.
Value Added Tax (VAT)
VAT is therefore fundamentally different from Corporation Tax.
VAT registration depends on factors such as the nature and level of taxable turnover and the business's circumstances.
VAT applies once you exceed a revenue threshold.
- €42,500 for services
- €85,000 for goods
How VAT is calcuated?
Imagine a VAT-registered business invoices a customer:
€1,000 + VAT
The customer pays the business the VAT-inclusive amount.
The VAT element is generally collected by the business on behalf of the tax system, subject to the applicable VAT rules and input VAT deductions.
It should not simply be thought of as additional business profit.
In simplified terms,
- The customer pays VAT
- The business collects VAT
- The business accounts for VAT to Revenue
- Eligible input VAT may be deducted
- Net VAT liability/refund is calculated
How to take money from your company?
The money in the company bank account is not automatically your personal money simply because you own or control the company.
If you want to take money from the company, the payment needs to have an appropriate basis and tax treatment.
Depending on the circumstances, this might be:
- Salary/remuneration
- Dividend
- Reimbursement of legitimate business expenses
Taking money from your company as salary
If your company pays you a salary or director remuneration, PAYE generally applies.
Payments must be reported to Revenue on or before the payment date.
Depending on the circumstances, salary can involve:
- Income Tax
- USC
- Employee PRSI
- Employer PRSI
The company generally operates the payroll and deducts the relevant amounts.
A simple example:
Suppose a company decides to pay its director a €30,000 salary
That does not mean the director simply receives €30,000 into their personal bank account.
The applicable payroll deductions are calculated and reported, and the director receives the net amount after relevant deductions.
At the same time, the salary may be an expense of the company, subject to the applicable tax rules.
Taking money from your company as dividend
A dividend is generally a distribution made by a company to its shareholders.
This is different from salary.
A company cannot simply treat all of its turnover as dividend money.
The company makes a profit, Corporation Tax is considered, then the Company has distributable profits and a dividend can be declared.
Irish resident companies generally have to deduct Dividend Withholding Tax (DWT) at 25% from dividends and other distributions, subject to applicable exemptions.
Revenue explains that dividend income is taxable and must be declared. Dividend income is added to other income, and the Income Tax rate depends on the person's overall income and circumstances.
Revenue also states that dividend income can be liable to USC and PRSI.
This is why people sometimes refer to taxation of company profits and subsequent distributions as involving more than one layer of tax.
Do company directors pay PAYE?
Yes, generally.
Revenue specifically states that PAYE applies to both proprietary and non-proprietary directors.
An Irish incorporated company must operate PAYE on director income, even where there are no other employees.
This means a director cannot simply decide:
“I'm a director, so I can withdraw €2,000 from the company every month without payroll.”
The treatment depends on what that payment represents.
It’s worth consulting an expert tax advisor in Ireland to plan and avoid surprises.
Director’s Tax Filing
If you own more than 15% of the company shares and a directorship:
- Revenue classifies you as a “Proprietary Director”
- Your personal tax filing changes from Form 12 (current) to Form 11.
So we will file your taxes once the company is registered.
What is the difference between Revenue and CRO compliance?
Revenue deals with taxation.
Depending on your business, this can include:
- Corporation Tax
- PAYE
- VAT
- Income Tax
- USC
- PRSI
- Dividend Withholding Tax
The CRO deals with company registration and company-law filings.
This includes the company's annual return filing.
A company can have no Corporation Tax to pay and still have CRO filing obligations.
What is a CRO Annual Return?
Every Irish company must file an Annual Return, generally using Form B1, with the CRO.
The CRO states that an Annual Return is required at least once every year, whether the company is trading or not.
The First Annual Return
The first Annual Return is made up to a date six months after incorporation.
Importantly, financial statements do not have to be attached to the first six-month Annual Return.
Subsequent Annual Returns generally involve financial statements and other required documentation.
The Annual Return must be filed within the applicable filing period.
CRO guidance currently states that the filing deadline is within 56 days of the date to which the return is made up.
Let’s Talk
Still have doubts?
Click the whatsapp chat icon in the right corner of your screen to live chat with us. Call us at 087 225 7706 or email: admin@tascaccountants.com.
