TAX MATTERS
Tax Obligations of a Business Owner
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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 for that.
Together, they form your total tax and social contribution liability.
Limited Company Tax
Once the company is registered, you need to register for taxes with the Revenue Commissioners.
You have to pay a corporation tax:
- 12.5% on trading income
- 25% on non-trading income
Non-trading income means income that a company receives outside of 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 kicks in once you surpass a revenue threshold.
- €42,500 for services
- €85,000 for goods
Will I pay more tax if I become a director of a company?
When you become a director, you’ll have two income sources:
- Your salary from your current job (if you have one)
- Salary or director’s income from your company
Each salary will be taxed separately through PAYE, so you’ll see deductions like income tax, USC, and PRSI from both.
What you’ll need to watch is your total taxable income across both roles, because it could push you into a higher tax bracket.
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You can keep your salary from the company relatively low. Supplement your income later with dividends when the company is more profitable, since dividends are taxed differently.
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.
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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.
