CORPORATION TAX RATE IS 12.5%
If you conduct your business through a registered company, corporate tax will be charged on any taxable profits. Taxable profits are not the same as accounting profits, and adjustments may need to be made. Corporate tax rate is 12.5%.
The higher rate of corporation tax is 25% which is chargeable on non trade income, such as interest, dividends and rental income. The income in question is income chargeable under Case III (e.g. discounts, foreign income, interest on Government Securities, deposit interest not subject to D.I.R.T.), Case IV (royalties, miscellaneous income, deposit income subject to D.I.R.T.) and Case V (rental income from land and buildings in the State). The 25% rate will also apply to income from working minerals, petroleum activities and dealing in or developing land, other than construction operations.
INTEREST & ROYALTIES
Payments such as interest and royalties can be made without deduction of tax within such a group resident in the EU.
Interest in the course of a trade or business can be paid without deduction of withholding tax to a company resident in the EU or a tax treaty country.
LOSS RELIEF
Trading Losses are allowed against profit before tax is charged.
You can set off any losses incurred in a trading operation against other taxable income from what ever source.
- Losses in the current year are allowable against all income
- Losses carried forward are allowable only against income from the same trade
- Losses carried forward can be augmented by unrelieved capital allowances
- Losses on Case V (Rental Incomes) are only allowed against other Case V income
PATENTS
Inventor’s tax relief is available under certain conditions.
Tax-free income from patent royalties is available to individuals who themselves participate in the development of the invention.
Dividends from qualifying patent income are tax exempt when paid on ‘eligible shares’ or to an individual involved in the development process of the invention.
The amount of tax-free royalty income is restricted to the amount which would have been received if the parties were dealing at arms length. Certain conditions must be met for patent distributions to qualify for tax relief.
TRANSFERRING A BUSINESS WITHIN A FAMILY
Reducing tax when I retire?
When the annual rush to file income tax returns is finished, it is worth while considering long term issues facing a family business.
One aspect that should be considered is the ownership of close family members of shares in the family business.
There are three main tax heads to consider where shares in family business are gifted from a parent to a child. They are capital gains taxes, capital acquisitions taxes and stamp duty.
1. Capital gain tax is payable by a parent on the disposal of shares in a family company. Retirement relief is available in some cases, which allows for an exemption from capital gains tax.
The parent gifting the shares must be over 55 years of age, must have held the shares for a ten-year period and have been a full-time director of the company to qualify for this exemption. The firm must also be a trading company and the child receiving the shares must hold onto the shares for at least six years after the gift.
2. Capital acquisitions tax is payable by a child on the receipt of a gift of shares in a family company from a parent. The rate applies to the market value of the shares in the company if there have been no previous gifts or inheritances. There is a relief from capital acquisitions tax known as business property relief, which exempts 90% of the market value of the shares.
3. Stamp duty applies to the transfer of shares in a company. A gift of shares from a parent to a child is liable to stamp duty at 1% of the market value of shares and is payable by the child. It is important that parents and children adopt a planned approach to succession to shareholding in the business over an appropriate time frame.
We shall be happy to assist you with your tax and financial planning and setting out your plan for exiting your business.
PROPRIETARY DIRECTOR
A proprietary director is required to make an annual income tax return.
Proprietory directors are people who own more than 15% of the share capital of their companies.
Proprietory directors are obliged to make tax returns, without being served notices, covering all their income by 31st October for the preceding tax year. For Income Tax 2009, the return must be filed by 31st October 2010 or by 16th November 2010 when filing via ROS).
Proprietory directors are obliged to pay preliminary tax by 31st October for the current tax year. Preliminary Tax 2010 must be paid by 31st October 2010 or by 16th November 2010 when filing via ROS).
In determining the 15% holding, shares which are held by the director’s spouse or minor children are taken into account, as are shares held by trustees of a settlement to which the director or the director’s spouse had transferred shares.
