Tax on Trading Income
The system of taxation of trade/business income in Ireland is broadly similar to that in the United Kingdom. The profits of a trade or profession carried on within Ireland are subject to Irish income tax in all cases, regardless of residence.
Where an individual is tax resident or in some categories of case, ordinarily tax resident, then he may be liable to Irish tax on the profits of a trade or profession carried on abroad. The split year option referred to in respect of employment income, does not apply in respect of trading or services income.
As with other income sources, a person who is resident and domiciled is liable to Irish tax on his worldwide investment income. A person who is Irish resident, but not Irish domiciled, is liable on to Irish income tax in respect of investment income from a source outside Ireland to the extent only that it is remitted into Ireland.
A person who remains ordinarily resident because of formerly being resident (see above), remains liable to Irish tax on unearned foreign income other than employment and self-employment to the extent the income is remitted and exceeds €3,810 in the tax year. If the person is not resident or domiciled but is ordinarily resident, he is liable to Irish tax on unearned foreign income in excess of €3,810 in the tax year.
Income on certain designated Irish government securities is exempt from income tax if held by a person who is not ordinarily resident in Ireland.
Deposit interest retention tax (DIRT) is a withholding tax applied directly by financial institutions in respect of deposit interest. The rate is 39 % and satisfies the tax liability. It may not be reclaimed by most persons. There is relief in respect of interest on savings for the purpose of the first time purchase of property.
Income Tax Rates
Irish personal income tax applies at 20% on income up to €33,800. The balance over that is subject to tax at 40%.
In the case of married couples with one income, the 20% tax band applies up to €42,800. In the case of married couples, with two incomes, the 20% rate applies to €67,600 per annum
The principal tax credits are as follows
- a single person with no dependent child €1,650
- married or civil partner €3,300
- employee (PAYE) tax credit €1,650
- earned income tax credit (self-employed)
- age tax credit single person €245
- age tax credit married couple civil partners €490
- €950 medical insurance standard rate 20%
- dental insurance standard rate 20%.
There are a range of other tax credits applicable to person in special circumstances such as
- widowed persons,
- single persons with dependent child,
- persons with an incapacitated child,
- persons looking after a dependent relative
The capital gains tax general rate is 33%. The annual exemption is only €1,270
Universal Social Charge
Pay-related social insurance (PRSI) and universal social charge (USC) are significant taxes in Ireland. Broadly speaking pay related social insurance is at lower rates in aggregate, than national insurance contributions in the United Kingdom.
Universal social charge was introduced during the financial crisis and remains in place. It is charged at significant rates on a basis similar to PRSI and is separate to income tax. There are very few allowances or credits. It was designed specifically to bring almost all income, including that of low paid employees, into the tax net albeit at relatively low rates of charge
- below €13,000 exempt
- 0 to €12,012 0.5%
- €12,012 o €18,772 2.5 percent
- €18,772-€70,044 5%
- above €70,045 8%
There is rate of 11% for persons who are not subject to PAYE, with annual income in excess of €100,000.