Irish Business Taxes Explained: Income Tax, Corporation Tax, and VAT

Starting a business in Ireland is exciting, but understanding how taxation works is just as important as registering with the CRO or opening a bank account. Whether you are a sole trader, a partnership, or a limited company director, you must comply with Irish tax law.

The good news is that Ireland has one of the most competitive corporate tax regimes in the world, attracting global businesses and supporting local entrepreneurs. However, tax rules vary depending on your business structure. This guide breaks down the three most important areas of Irish business taxation in 2025: Income Tax, Corporation Tax, and VAT.

Income Tax in Ireland (for Sole Traders and Partnerships)

If you operate as a sole trader or in a partnership, you are taxed personally on all business profits. This means the business income is treated as your personal income.

The standard income tax rates in Ireland are:

• 20% Standard Rate: Applies to income up to €42,000 (for single individuals in 2025).

• 40% Higher Rate: Applies to income above this threshold.

In addition, sole traders and partners must pay:

• PRSI (Pay Related Social Insurance) – funds social welfare benefits.

• USC (Universal Social Charge) – applied to all income above €13,000 annually, with rates ranging from 0.5% to 8%.

  
  

Example: If you earn €50,000 as a sole trader, €42,000 will be taxed at 20%, and the remaining €8,000 at 40%, plus PRSI and USC.

Key Point: Income tax can be high for profitable sole traders, which is why many switch to a limited company structure when earnings increase.

Corporation Tax in Ireland (for Limited Companies)

Ireland is famous for its 12.5% corporation tax rate on trading profits, one of the lowest in the EU. This makes it attractive for entrepreneurs and multinational corporations alike.

Key details for 2025:

• 12.5% Rate applies to trading income (from regular business activities).

• 25% Rate applies to non-trading income (such as investment or rental income).

• 15% Rate applies to certain large multinational companies under OECD global tax rules (revenue over €750m).

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In addition to paying corporation tax, company directors may pay income tax on salaries and dividend tax if they withdraw profits.

Example: If your company makes €100,000 profit, corporation tax of €12,500 is due. If you then pay yourself a salary, it will be taxed under the income tax system separately.

Key Point: Retaining profits in the company can be more tax-efficient, allowing for reinvestment and long-term growth.

VAT in Ireland (Value-Added Tax)

VAT (Value-Added Tax) is a sales tax applied to goods and services. In Ireland, the standard VAT rate is 23%, but reduced rates apply in certain cases:

• 13.5%: Applied to services such as hospitality, construction, and hairdressing.

• 9%: For newspapers and certain tourism-related services.

• 0%: For exports, basic food, and children’s clothes.

VAT registration rules in 2025:

• Mandatory if turnover exceeds €40,000 for goods or €75,000 for services.

• Voluntary registration is possible, which allows businesses to reclaim VAT on purchases even if turnover is below thresholds.

Businesses registered for VAT must:

• Charge VAT on sales.

• Issue VAT invoices.

• File VAT returns (usually every two months).

  
  

Example: A consultant earning €80,000 annually must register for VAT. They will charge clients VAT on invoices, but they can also reclaim VAT paid on business expenses like laptops or office rent.

How Taxes Work Together

• A sole trader pays income tax, PRSI, and USC on profits but usually doesn’t deal with corporation tax.

• A limited company pays corporation tax on profits, and directors/shareholders pay personal taxes on salaries or dividends.

• Any business above the threshold must handle VAT in addition to its income or corporation tax obligations.

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This combination means Irish entrepreneurs need to carefully manage both business and personal tax obligations. Good record-keeping and professional accounting advice can save significant money and stress.

Compliance and Deadlines

In Ireland, missing tax deadlines can lead to penalties. Key dates include:

• 31 October: Deadline for filing income tax returns for sole traders (extended to mid-November for online filing).

• Annual Return Dates: Limited companies must file with the CRO and Revenue annually.

• VAT Returns: Typically due every two months, though smaller businesses may file less frequently.

  
  

The Revenue Commissioners provide online services through ROS (Revenue Online Service), making compliance easier. Still, many businesses hire accountants to ensure accurate filing.

Conclusion about Business Taxes

Taxes are one of the most important aspects of running a business in Ireland. Sole traders and partnerships face income tax, PRSI, and USC, while limited companies benefit from the 12.5% corporation tax rate but must manage stricter compliance. On top of this, most growing businesses must deal with VAT obligations.

Understanding these taxes early allows you to structure your business more effectively and avoid unnecessary costs. With Ireland’s competitive tax system and modern digital filing tools, compliance is easier than ever — but professional advice is always recommended.

Next Step: Want to choose the right structure for your tax situation? Read our guide on Sole Trader vs Limited Company in Ireland.