Taxes in Ireland: All you need to know

To find out more about the taxes payable in Ireland as an individual or legal entity, you need a detailed guide. That’s why today we bring you the necessary information on the rates of each tax, important points to know depending on your type of taxpayer and some key information on the tax benefits of the tax system in Ireland.

Taxes for individuals or natural persons in Ireland

The personal tax system in Ireland is progressive, which means that tax rates increase according to the income of each individual. The main taxes applicable to Irish residents are set out below:

Income tax in Ireland

Income tax in Ireland is one of the main taxes payable by individuals on their annual income. It’s applied in two tranches:

• 20% for income up to a certain threshold.
• 40% for income above this threshold.

For 2024, the income threshold was €40,000 ($43,484) for single individuals and €80,000 ($86,969) for married couples filing jointly. For example, if a single person earns €50,000 ($54,358) per year, the first €40,000 ($43,484) will be taxed at 20% and the remaining €10,000 ($10,872) at 40%. This progressive scheme ensures that higher earners contribute more to the system.

Pay Related Social Insurance (PRSI) in Ireland

PRSI is a compulsory contribution that funds the social security system in Ireland, covering benefits such as health insurance, pensions and unemployment benefits. This tax is calculated as a percentage of income and varies according to the category of worker:

• 4% for employees earning more than €352 ($382) per week.
• For those who earn less than this amount, they’re exempt from this contribution.

For example, a worker with a weekly wage of €500 ($543) must contribute 4% ($22) to PRSI. It’s important to note that PRSI also applies to income derived from self-employment, although rates and conditions may vary.

Universal Social Charge (USC) in Ireland

The USC is another tax levied on income and varies according to the level of annual income. This tax was introduced in Ireland as a general funding measure for the welfare system and is calculated in tranches:

• 0.5% on the first €12,012 ($13,055).
• 2% on income between €12,013 ($13,056) and 22,920 ($24,911).
• 4.5% on income between €22,921 ($24,912) and 70,044 ($76,129).
• 8% on income over €70,044 ($76,129).

So, someone who earns €60,000 ($65.206) per year will pay different percentages of USC in each income bracket. This tiered system allows those with lower incomes to pay a smaller proportion in taxes.

Value Added Tax (VAT) in Ireland

Although VAT (Value Added Tax) in Ireland isn’t levied directly on the income of individuals, it’s a relevant indirect tax as it’s levied on most goods and services consumed in the country. The standard VAT rate is 23%, although reduced rates of 23% are available:

• 13,5% for certain services, such as construction work and food in restaurants.
• 9% for products and services related to hospitality and tourism, as well as print media.
• 0% for Basic products such as basic foodstuffs medicines and books educational.

This tax affects consumers in general, as it increases the final price of products and services. For example, if a consumer buys a tourist service for €100 ($108), he’ll pay a reduced VAT of 9%, resulting in a total of €109 ($118).

Local Property Tax (LPT) in Ireland

Property tax is compulsory for those who own property in Ireland. This tax is based on the assessed value of the property and varies according to its value range. LPT rates are proportional and set at different levels, as shown below:

• 0.18% for properties worth up to €1,000,000 ($1,086,854).
• 0,25 % for the portion of the value exceeding €1,000,000 ($1,086,854).

For example, a house valued at €900,000 ($978.146) would be subject to an LPT rate of 0.18%, resulting in a tax of €1,620 ($1.760) per year. This tax is used by local governments to fund services such as infrastructure maintenance and community programmes.

Capital Gains Tax (CGT)

Capital gains tax is levied on individuals who gain from the sale of assets, such as real estate, investments or commercial property. In Ireland, the standard rate of CGT is 33% of the profit earned. This tax is only levied on the net profit and there are some exemptions, such as for properties that have been the taxpayer’s main residence.

For example, if a person buys a property for €200,000 ($217,392) euros and sells it for €300,000 ($326,082), the gain of €100,000 ($108,694) would be subject to CGT at 33%, resulting in a tax of €33,000 ($35,867).

Capital Gains Tax (CAT)

This tax applies to persons receiving gifts or inheritances, and the current rate is 33% on the value of the asset received. However, there are exemption thresholds depending on the relationship between the donor and the recipient:

• €320,000 ($347,805) for inheritances or gifts from parents to children.
• €32.500 ($35,323) for inheritances from other close relatives.
• €16.250 ($17,662) for inheritances from other unrelated individuals.

For example, if a child inherits a property of €500,000 ($543,482) from a parent, the exemption of €320,000 ($347,805) would apply and the 33% CAT would only affect the remaining €180,000 ($195,651), resulting in a tax of €59,400 ($64,559).

Taxes for legal persons or companies in Ireland

Ireland is an attractive destination for many companies due to its competitive tax policies and strategic position in Europe. The country also has a simplified tax system that allows companies to comply with their obligations in an efficient manner. Here we describe the main taxes payable by companies in Ireland, including rates and examples to understand their application.

Corporate Tax in Ireland

Ireland’s corporate tax rate is one of the lowest in the European Union, which has been one of the main reasons why many multinationals have set up operations in the country. This tax is levied on the income generated by companies and is divided into two types of rates depending on the type of activity:

• 12,5% for income derived from commercial activities.
• 25% for non-trading income, such as investments and other passive income.

For example, an Irish company generating income of €1,000,000 ($1,086,854) from its trading activities will pay €125,000 ($135,859) in corporate tax at 12.5%. This tax rate has been a key factor in attracting technology, pharmaceutical and financial companies, and represents a major competitive advantage compared to other European countries.

Value Added Tax (VAT) Companies in Ireland

Value added tax (VAT) is also levied on businesses in Ireland, although it’s mainly passed on to consumers. However, companies must manage this tax and comply with reporting and payment requirements according to their income and sector. The current VAT rates in Ireland are:

• 23%: Standard rate that applies for most of goods and services.
• 13.5%: Reduced rate for specific services, such as construction and prepared food.
• 9%: Rate applicable to tourist services and printed media.
• 0%: For basic products, such as basic foodstuffs, medicines, and books.

Irish registered companies must collect and remit VAT to the tax authorities, and can reclaim VAT paid on goods and services necessary for their operation, which helps to reduce their tax burden.

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Withholding Tax

In Ireland, companies must pay withholding tax on certain payments they make to individuals and companies outside Ireland, such as dividends, interest and royalties. These withholding taxes are mandatory and are intended to ensure the taxation of income generated in Ireland, although they can be reduced or eliminated by means of double taxation agreements.

• 20% on dividends paid to foreign shareholders.
• 20% on royalties and other similar payments.
• 0% interest, provided that the applicable exemption conditions are met.

For example, if an Irish company pays €10,000 ($10,868) in royalties to a foreign entity, it must withhold €2,000 ($2,173) and remit it to the Irish tax authorities. If there’s a double taxation agreement with the recipient’s country of residence, this rate can be reduced, eliminating double taxation.

Employer Pay Related Social Insurance (PRSI) in Ireland

Companies in Ireland are also obliged to contribute to the social security system through Pay Related Social Insurance (PRSI) for each employee they employ. The PRSI rate for employers varies according to the employee’s salary:

• 8,8% for salaries below €410 ($445) per week.
• 11.05% for salaries more than €352 ($382) per week.

For example, if a company pays an employee a weekly salary of €500 ($543), it must contribute 11.05% of that amount ($60.03) to the PRSI. These contributions finance Ireland’s social security system, which covers health benefits, pensions and unemployment insurance, benefiting both employees and employers by strengthening the country’s social stability.

Commercial Property Taxes (Commercial Rates) in Ireland

Companies owning commercial property in Ireland are subject to a local tax known as “Commercial Rates”. This tax is determined and collected by the local authorities and is calculated on the basis of the value of the property. The funds raised through this tax are used to finance infrastructure and community services in commercial areas.

The specific rates of this tax are set by each local authority, so the amount can vary significantly. For example, in a region with a rate of 0.22%, a commercial property valued at €500,000 ($543,482) would be taxed at €1,100 ($1,194) per year. Companies usually calculate these costs in their annual budget to ensure compliance with local regulations.

Tax benefits in Ireland

In addition to its low tax rates, Ireland offers a range of tax benefits and exemptions aimed at stimulating investment and economic growth for both companies and individuals. Below are some of these incentives:

Research and development (R&D) tax credits in Ireland

Ireland incentivises innovation through tax credits that allow companies to deduct the costs of their research and development activities. This benefit allows companies to claim up to 25% of R&D expenditures as a tax credit, applicable for corporate income tax purposes. This credit can be repaid in three years if it can’t be used immediately.

For example, a company that invests €100,000 ($108,694) in R&D activities could claim €25,000 ($27,165) as a tax credit, which significantly reduces its tax burden. This incentive is particularly attractive for companies in the technology, pharmaceutical and biotechnology sectors, which tend to have high development costs.

Tax benefits for start-ups (Startup Relief) in Ireland

Ireland has a specific tax benefit for new companies, known as “Startup Relief”. Newly established companies can apply for an exemption from corporate income tax during their first three years of operation, provided that their profits don’t exceed €40,000 ($43,484) per year. This benefit applies to companies that generate employment and contribute to local economic development.

For example, a company that generates €35,000 ($38,043) in annual revenue during its first three years could be exempt from paying corporate income tax, which is a great relief for entrepreneurs and small businesses in their early stages.

Dividend withholding tax exemptions for foreign companies in Ireland

In order to attract foreign investment, Ireland allows exemption from withholding tax on dividends paid to parent companies established in countries with which it has double tax treaties. This measure reduces the tax burden for multinational companies wishing to establish subsidiaries in Ireland, providing an incentive for investment and job creation.

Investor and Entrepreneur Residency Programme in Ireland

Ireland offers a residency programme for investors and entrepreneurs that makes it easier for those investing in the country to obtain residence permits. Through the Immigrant Investor Programme (IIP), investors can qualify for residency in Ireland by making a substantial investment in the local economy. This programme is designed to attract foreign talent and capital, strengthening the Irish economy and encouraging the development of key sectors.

Frequently Asked Questions about taxes in Ireland

Here we answer some common questions about the Irish tax system for both individuals and companies.

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