Corporation tax relief for a qualifying new Irish company in years 1 to 3.
Corporation tax saved
—
CT before relief
—
Net CT payable
—
Relief type
—
Relief claimed
—
Your breakdown
Updates live as you type
Item
Amount
Three free years for a new trading company
Section 486C gives new Irish companies a three-year window in which their corporation tax liability can be wiped out entirely, provided the annual CT does not exceed 40,000 euro. At a trading profit rate of 12.5%, that exempts annual profits of up to 320,000 euro. For a genuinely new business this is a significant cash flow benefit. The money that would have gone to Revenue can instead fund hiring, product development, or working capital in the years when cash is tightest.
The cliff at 60,000 euro in CT liability (equivalent to profits of about 480,000 euro at 12.5%) is important. Above that level no startup relief applies at all. A company that does very well in year one and generates profits above 480,000 euro pays the full 12.5% with no reduction. The marginal relief band between 40,000 and 60,000 euro in CT tapers the benefit down over that range, so there is no sudden penalty for crossing 40,000 euro in CT.
Worked example: 200,000 euro profit in year one
A startup earns 200,000 euro in trading profits in its first year. Corporation tax at 12.5% is 25,000 euro. Since 25,000 euro is below the 40,000 euro threshold, the full 25,000 euro is relieved. Net CT payable: zero. The company keeps the entire 25,000 euro that would otherwise have gone to Revenue. In year four, once the relief window closes, the same profit level would result in 25,000 euro of CT becoming payable. Planning for that transition matters, because it can look like a sudden increase in tax when it is really the end of a holiday period.
The employer PRSI link
One feature of the relief that catches founders out is that it is capped at the amount of employer PRSI paid by the company in the qualifying year. A company with 25,000 euro in CT liability but only 10,000 euro in employer PRSI paid that year can only claim 10,000 euro in startup relief, not the full 25,000 euro. The balance of 15,000 euro would carry forward to future years, again subject to the PRSI cap in each of those years. This design links the subsidy to payroll spending. A software company with two founders earning reasonable salaries typically pays enough PRSI to absorb the full CT relief, but a low-headcount investment-type startup may find the PRSI cap binding.
Frequently asked questions
Which companies qualify for the Irish startup CT relief?
Section 486C of the Taxes Consolidation Act 1997 provides relief for new companies commencing a qualifying trade. The company must be incorporated in Ireland or the EU, must not be a continuation of an existing trade, and must carry on a trading activity. The relief is available for the first three years of trading. Certain trades, including professional services companies, land dealing, and financial activities, are excluded from the relief.
How much corporation tax can a startup save?
In each of the first three years, if the company has a corporation tax liability of 40,000 euro or less on its trading profits, the full amount is relieved and no CT is payable. Where the CT liability is between 40,000 euro and 60,000 euro, marginal relief tapers out the benefit. Above 60,000 euro in CT, no startup relief is available. The relief is calculated on the actual CT liability at 12.5%, not on profit directly, so it shelters annual trading profits of up to 320,000 euro completely.
Is there a link between startup relief and employer PRSI?
Yes. The relief available in any year is limited to the amount of employer PRSI paid by the company in the same year. This means the relief is tied to real employment activity. A company with minimal staff and therefore low PRSI costs gets less benefit even if its CT liability would otherwise fully qualify. The intention is to encourage job creation alongside the tax break. For most active trading companies the PRSI cap is not a binding constraint, but a company with one or two founders and no other employees should check whether the PRSI paid is sufficient to shelter the full CT.
What happens after the three-year relief period?
After the initial three qualifying years the company pays corporation tax at the standard 12.5% rate on trading profits. Any unused relief from an earlier year when the CT liability was below 40,000 euro can be carried forward and applied against CT in a subsequent year within the five-year relief window, subject to the employer PRSI cap each year. Once the relief period ends the company operates as a normal taxpaying entity.