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3 year Tax exemption for Startup companies in Ireland

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There are a number of important factors to think about when setting up a company. The location of a new company can be influenced by various elements such as; access to skilled and educated employees, access to markets, ease of doing business, tax rates, tax reliefs, and language.

Ireland scores well in all of the above areas. The country has a skilled and educated workforce, access to the EU, it is an easy place to do business, its corporate tax rate is a low 12.5% and it is soon to be the last English speaking country in the EU. A lesser known fact about setting up a company in Ireland are the tax reliefs available to new companies/startups.

Tax Relief
The tax relief available to new companies/startups in Ireland is called Section 486C and is implemented as a reduction on your corporate tax for the first three years of trading. The tax relief available applies to profits from a qualifying trade and to chargeable gains arising on the disposal of “qualifying assets”.

Certain criteria must be met in order to avail of this tax relief. If your new company/startup was incorporated on, or after 14th October 2008, or if it was set up and began trading between the dates 01st January 2009 and 31st December 2021, then you can apply for tax relief from corporate tax.

Your company may qualify for relief if the corporate tax due is €40,000 or less in a single tax year. In the event that its corporate tax due is between €40,000 and €60,000, then it may qualify for partial relief.

Pay Related Social Insurance (PRSI)
The amount of employer's Pay Related Social Insurance (PRSI) a startup company pays must be a maximum of €5,000 per employee and €40,000 overall in order to fully avail of this tax relief.

Qualifying Trades

A qualifying trade does not include:

  • a trade which was previously carried on by another person or formed part of another person's trade,
  • a trade of dealing in or developing land or exploration and extraction of natural resources (Land development, exploration and extraction of petroleum or minerals, fishery, aquaculture, production of agricultural products and the coal sector), or
  • a trade consisting of "service company" activities as defined in section 441 of the TCA 1997.
  • Service companies include close companies whose businesses consist of the carrying on of a profession or the provision of professional services, or of exercising an office or employment. Service companies also include businesses that provide services to professionals

Service Companies
As mentioned previously under Qualifying Trades, this tax relief does not apply to service companies. Under Section 441 a service company is defined as a close company:

a) whose business consists of or includes the carrying on a profession or the provision of professional services;

b) which holds or exercises an office or employment;

c) whose business consists of or includes the provision of services or facilities of whatever nature to or for:

 i. a company within the categories (a) and (b) described above,

ii. an individual or partnership which carries on a profession,

iii. a person who holds or exercises employment,

iv. a person or partnership connected with any of the above.

How much relief is available?
In order to qualify for full tax relief, the total corporation tax payable by a company must not exceed €40,000. When a qualifying new company has a corporation tax liability up to this amount, it will have its corporation tax liability reduced to zero. The maximum relief available over 3 years is €120,000. For companies involved in the transport industry, this figure is €100,000.

If you would like to set up a new company in Ireland, or you would like to know more about Ireland’s 3 year tax exemption for startup companies, you can contact us directly using the form below:

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