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Tax Guide Ireland

Ireland is an island that is situated in Northwest Europe. It spans across 82,421 kilometers, and is divided into two broad peripheries: Northern Ireland, and Ireland. Northern Ireland is politically a part of United Kingdom, whereas the remainder lies under an independent parliamentary democracy, which is officially called Ireland. The capital of Ireland is Dublin. Its official language are referred to as Irish and English. The business language, however, is English. Additionally, the official currency of Ireland is Euro (EUR).

The overall macroeconomic environment in Ireland is considerably stable, because of a relatively stable political environment. It is also a regular member of the European Union (EU), and some of the most prominent and notable international organizations. There is no doubt to the fact that Ireland is very well-directed towards constant upgradation and sustenance of a promising and high-growth economic environment, which is highly supportive of the business needs.

Hence the trajectory on which Ireland is following over the past few decades paints a rosy picture in terms of business projections in the future. Over the years, they have managed to come off as an attractive investment location that has also been majorly an outcome of a favorable tax environment that helps businesses to keep their operating costs low.

Corporate Taxation in Ireland

Corporation Tax in Ireland is taxable on income, as well as capital gains. The standard rate of Income (Trading Income) is 12.5%, the high rate on passive income is 25%, and the capital gains tax rate is around 33%. The income determination that is undertaken in this respect is to mainly highlight the existing difference between income sources is broadly categorized to be either under trading income or non-trading income. Trading income is referred to as the income that is gained as a result of normal business activities. On the other hand, non-trading income is referred to as income that is gained as a result of income sources like dividends, selling of shares, or any other income generating activity other than business.

Companies that are residents in Ireland are taxed on their worldwide income. However, as far as Non-resident companies are concerned, they are subject to taxation on trading profits that are gained from a branch in Ireland on income that is sourced in Ireland only.

Other than taxes on corporate income, Irish corporations also have to pay a Value Added Tax (VAT) at a rate of 23% and this rate is applied on supply of a vast majority of goods and services. This is treated as a consumption tax, and therefore, it is levied across all consumable items. However, the Irish government continues to design policies in order to ensure that it provides facilities to certain sectors. For instance, there is a reduced rate of 13.5% that is applied on building services, labor intensive services, domestic fuel, and power. Additionally, a new reduced rate of 9% was also introduced towards tourism-related services, newspapers, as well as sporting facilities. For exports, as well as majority staple food rate items, oral medicines, books and children clothing were regarded as zero rated.

Given the fact that Ireland is a part of customs territory of the European Union, goods that are imported from countries outside the EU are liable to pay a tax ranging from 0% to 14%.

Personal Taxation in Ireland

Personal Income Tax is imposed on worldwide income for individuals that residents, and are domiciled in Ireland. On the other hand, for individuals that are residents of Ireland, but are not domiciled, are supposed to pay taxes on Irish-source income as well as foreign employment income that is earned by the individual in Ireland. Additionally, they are also supposed to pay taxes on other foreign income that is remitted to Ireland. On the other hand, as far as non-residents are concerned, they are liable to pay Irish personal income tax only on the income that is generated within Ireland only.

For the fiscal year 2021, the tax rates for Ireland are summarized in the following pointers below:

  • For single/widowed person (that has no dependents): The applicable tax rate is 20% for income up to EUR 35,300. Otherwise, the tax rate is 40% that is applied to the balance of income over EUR 35,300.
  • Married couples (that have a single income stream): The applicable tax rate is 20% for income up to EUR 44,300. Otherwise, the tax rate is 40% that is applied to the balance of income over EUR 44,300.
  • Married couples (that have two income streams – of at least EUR 26,300 each): The applicable tax rate is 20% for income up to EUR 70,600. Otherwise, the tax rate is 40% that is applied to the balance of income over EUR 70,600.

In exception to the aforementioned tax rates, there are exemptions that are offered by the Irish residents. For example, for residents aged 65 and above, they are liable to income tax only if their income is above a specific threshold. For the fiscal year 2021, this threshold was EUR 18,000 for single individuals (without any dependents), EUR 36,000 for married couples.

Other than personal income tax, there are also a couple of other taxes that are supposed to be paid by individuals. Pay-related Social Insurance (PRSI) is charges as an employment income, which includes taxable non-cash benefits. Individuals that earn an amount less than EUR 352 in a given week are not supposed to pay PRSI for the particular week. For Class A1 employees (most employed persons), the employer is supposed to pay an allowance of 11.5%. The employee, on the other hand, is supposed to bear an amount of 4%. For Class S1 employees, only the employee has to bear a tax levy of 4%.  

In the same manner, there is also a Universal Social Charge that is payable on gross income, including notional pay. This is adjusted after certain capital allowances, prior to deducting pension contributions. The USC is a tax charge that is payable on gross income, including notional pay, after relief for certain capital allowances. For individuals aged below 70 years, the total income below 13,000 EUR per annum, a zero rate applies. This range varies in accordance with income slabs, and goes up to 11% (for income over EUR 100,000).  However, there are no net wealth/worth taxes on individuals in Ireland.

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