Income Tax Rates and Bands

The tax structure for business in Ireland

Income Tax Rates and Bands

Sole traders are taxed under the personal income tax regime on business profits, at rates of between 20% and 41%, (with the latter rate applying on income above EUR36,400 for a single taxpayer; EUR45,400 for a one-salary married couple; and EUR72,800 for a two-salary married couple).

However, the headline rate for individual taxpayers is generally 20%, although restrictions announced in the 2010 Finance Bill  to reliefs afforded to higher income taxpayers have resulted in an effective 30% rate for this group. Taxpayers availing of specified reliefs will now become subject to relief restriction provisions at an adjusted income level of EUR125,000 (down from EUR250,000) and where adjusted income reaches EUR400,000 (down from EUR500,000), they will become subject to the full restriction, and the pay the effective 30% rate, as mentioned above.

In January 2009, a new income levy was introduced, payable on gross income before any reliefs are deducted. Non-resident and non-domiciled taxpayers will pay the income levy on any Ireland-sourced income, in the same way as for ordinary income tax.

Employers are responsible for deducting income levy payments from the salaries of their employees, and self-employed taxpayers will need to make an initial income levy payment alongside their preliminary tax payment, with the balance payable once the final assessment takes place.

From May 2009, the income levy is imposed at the following rates:

  • Income to EUR15,028: Exempt
  • Income to EUR75,036: 2%
  • Income to EUR174,980: 4%
  • Income above EUR174,980: 6%.

In August 2010, it emerged that major reforms to the PRSI system were under consideration

The overhaul has been proposed as part of plans for the introduction of a new ‘universal social contribution’ which would consolidate PRSI, the health levy and the income levy.

Under the universal system, contributions would be necessary on various new sources of income, including rental income, investments and share options (unearned income).

Details of the reforms are expected to be announced in the forthcoming budget later this year.

Penalties imposed for late or non-filing of income tax returns vary according to whether the penalty is being imposed under the individual income tax system, but can include an initial charge, and an increasing surcharge (representing a percentage of the unpaid tax), up to a maximum amount. The use of allowances can also be restricted, if the return is filed late.

Tax returns can be filed via the Revenue Online Service, and in fact, in 2009, this became compulsory for larger businesses.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

Further reading

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