There are a number of tax reliefs for Irish startups across all sectors. They can make a big difference when getting your new business off the ground.
This guide is intended to provide you with an overview, and identifies some areas you need to discuss further with your accountant or tax specialist.
Reliefs and incentives
There are plenty of reliefs and incentives available to startups in Ireland. Here are just some examples you can discuss with your accountant or tax adviser:
Action Plan for Jobs
This is a Government-wide initiative under which all Government departments and agencies work together to generate employment and stimulate the economy. Check out how the various initiatives under the Action Plan for Jobs can help your business.
Reliefs for individuals looking to set up, or invest in, a company
- SURE: If you recently set up your own business, you may be eligible for a tax refund under the Startup Refunds for Entrepreneurs scheme.
- Employment Investment Incentive: This scheme provides tax relief, subject to certain conditions being met, to individuals for the purchase of new ordinary share capital in a new or existing business.
Reliefs for all businesses (including sole traders, partnerships and limited companies)
- Pre-trading expenditure: Once you have started to trade, you may be able to claim a tax deduction for certain qualifying expenses incurred in respect of the business in the three years before the commencement. For tax purposes, these expenses are treated as if they had been incurred at the time that the trade started. These may include business-related leasing costs, legal fees and the cost of preparing business plans and feasibility studies.
- Recruiting employees: Investigate whether there are any applicable schemes that provide double tax deduction for wages and Employers’ PRSI if you employ a person who was previously unemployed.
- Consider the activity of the business: Certain additional tax initiatives may be available depending on the activity of the business – for example, relief for expenditure on research and development (R&D).
Relief for companies only
- Corporation tax relief: Certain companies do not have to pay corporation tax on their profits, subject to meeting certain conditions, for a period of time after commencing business. It is important to note that the relief does not apply to certain trades such as those involving the primary production of agricultural products, the processing and marketing of agricultural products, export related activities etc. Furthermore, the relief will not apply where the trade was previously carried on by another person in the State.
You can claim a tax deduction against your business profits for many business expenses that you incur wholly and exclusively for the purposes of the trade. These expenses are normally referred to as revenue expenditure. Revenue expenditure is your day-to-day running costs and it covers such items as wages, rent and running costs of vehicles or machinery.
R&D tax credit
As an incentive to companies carrying out certain R&D activities, a tax credit may be available. Review your business activities with your tax adviser to see if you qualify for R&D tax credits.
Tax treatment of losses is a complex area, and specialist tax advice is recommended for this (and, indeed, for all areas of tax). Ultimately, the relief available for losses will depend on whether the business is operated as a sole trader/partnership or through a company.
A capital allowance is a tax deduction for expenditure incurred on capital equipment, such as office furniture. It is worth reviewing your fixed-asset register to see if you are claiming capital allowances on all qualifying assets.
Accelerated capital allowances (a tax write-off given over a shorter period) are available on cars that have low CO2 emissions and for expenditure on certain energy-efficient equipment.
If your company has acquired certain intangible assets, it may be entitled to claim a tax write-off for the capital cost of the acquisition. Tax relief is available for capital expenditure incurred by companies on a broad range of intangible assets, including trade names, brands, know-how, publishing titles, copyright and goodwill directly attributable to those intangibles.
A close company is a company that is controlled by five or fewer shareholders (a “shareholder” for these purposes is not necessarily a single party but can include related or associated parties) or is controlled by its directors. The vast majority of companies in the SME sector are close companies, and specific tax consequences arise on transactions involving such companies.