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A company is considered local in Ireland if: it is registered domestically, or it is managed and governed from Ireland. However, there are some nuances.
In particular, companies registered in Ireland from January 1, 2015, are considered local companies for tax purposes, while companies registered before this date would be considered local companies for tax purposes from January 1, 2021 (in most cases).
Why do we need this information? We will understand further.
Local companies are taxed on profits made both domestically and abroad. Foreign companies are taxed only on income generated domestically.
Separately, it should be noted that income from foreign sources received by local companies is subject to corporate tax in the same way as income received domestically.
Profits of foreign representative offices of local companies are taxable locally if Ireland does not have a double tax treaty with these jurisdictions. This situation is with the income from foreign investment and trade income.
Corporate tax is levied on the profits of the company, which consists of:
1) Income from the direct activities of the company;
2) Passive income;
3) Capital increase. Standard household expenses can usually be deducted in calculating taxable income.
Why is Ireland attractive? The corporate tax rate is 12.5% for trading income. A 25% rate applies to non-trading income.
Some dividends received from the EU and countries of double tax treaties are subject to tax at a rate of 12.5%.
Value added tax applies to taxable groups of goods and services. Taxable transactions include most goods and services, however, there are exceptions.
Imports to Ireland and, as a rule, the acquisition of goods from suppliers in other EU member states. VAT is also levied on certain estimated deliveries.
The standard VAT rate is 23%. Preferential reduced rates are in the range of 0% -13.5%.
The obligation to register the status of VAT payer comes from an amount of 75,000 euros per year, or from an amount of 37,500 euros per year.
Depending on the percentage of goods and services that are sold and provided the correspondent type of money threshold is applied in each case.
As an exception, unknown entities that provide taxable supplies of goods or services in Ireland must register for VAT, regardless of the level of sales.
According to the law, the standard reporting period and VAT payments are every two months.
The accounting department of the company must compile quarterly, annual financial reports and provide declarations to the tax service. Contact us for more information.
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