Corporation tax on trading and passive profit.
Total corporation tax
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On trading (12.5%)
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After-tax profit
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Your breakdown
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The famous 12.5 percent, and the rate people forget
Ireland’s 12.5 percent corporation tax rate is the headline that built the foreign direct investment story, and it still applies to the trading profits of most companies operating here. What gets overlooked is that it is not the only rate. Non-trading or passive income, rental profits, deposit interest, dividends from outside the relevant categories, investment returns, is taxed at the much higher 25 percent. This calculator splits your profit into those two pots, taxes each at the right rate, and shows the combined bill and what is left after tax.
The distinction between trading and passive income is more than academic. Trading income is profit from an active business, selling goods, providing services, running operations. Passive income is money the company earns from holding assets rather than trading. A company that runs a consultancy and also lets out a property is taxed at 12.5 percent on the consultancy profit and 25 percent on the rent, and getting an item into the wrong category changes the bill by half as much again.
A company with €120,000 of trading profit
Take a company with €120,000 of trading profit and no passive income, the figures the tool opens with. The corporation tax is 12.5 percent of €120,000, which is €15,000. With nothing in the passive pot there is no 25 percent charge to add, so the total corporation tax is €15,000 and the after-tax profit is €105,000. Drop, say, €20,000 of rental income into the passive field and that slice would be taxed at 25 percent, adding €5,000, far more than the €2,500 the same amount would cost as trading profit.
The 15 percent global minimum tax
Two things sit beyond the basic split. The first is the global minimum tax. Under the OECD Pillar Two rules, very large groups with consolidated turnover above €750 million face a 15 percent minimum effective rate, so the biggest multinationals no longer get the full benefit of the 12.5 percent figure. The overwhelming majority of Irish companies are nowhere near that threshold and continue to pay 12.5 percent on trading income, but it is why you now see 15 percent quoted alongside the traditional rate.
The close-company surcharge owner-managers miss
The second is a trap for owner-managed companies specifically. A close company, broadly one controlled by five or fewer participators, can face a surcharge if it leaves certain undistributed income, including professional and investment income, sitting in the company rather than paying it out. The surcharge exists to stop people sheltering income in a company indefinitely at the lower rate. This calculator does not model the close-company surcharge, so a small company retaining passive profits should take advice before assuming the headline rates are the whole story. The figure here is the basic corporation tax on the profit you enter, not the final position after surcharges or reliefs such as the research and development credit.
When is my corporation tax actually due?
A company pays preliminary corporation tax before the year end and the balance after, with the return and final payment due within roughly nine months of the accounting period end. Large companies pay preliminary tax in two instalments, while smaller companies have a simpler single preliminary payment, so the timing depends on your size and your accounting date rather than a single fixed national deadline.
Is dividend income received by my company taxed at 25 percent?
Often it is treated as passive and taxed at 25 percent, but the position depends on the source. Dividends from Irish companies can be exempt, and dividends from certain trading companies in treaty countries may qualify for the 12.5 percent rate. Because the rules turn on where the paying company is resident and what it does, this tool keeps it simple by taxing whatever you put in the passive field at 25 percent.