The information in this section is
designed to give general information and assistance regarding taxes.
American firms should obtain professional assistance prior to making
a commitment that could have any tax impact.
Individual Taxation
Irish tax revenues are derived primarily
from income taxes on individuals and firms, the value-added tax, customs
and excise duties, stamp taxes, and capital gains taxes. While Irish
residents are liable to tax on all of their income, non-residents
are taxed only on that part of their income earned in Ireland. Individuals
that reside in Ireland and work for a foreign company without becoming
residents are subject to taxation on a remittance basis only. To avoid
a problem of double taxation, Ireland has concluded a number of treaties
with other countries, including the United States.
The income taxes are usually paid by payroll deductions called "Pay
As You Earn" (PAYE). The PAYE is similar to the payroll withholding
system applied in the United States. Individuals and firms must also
contribute to the Pay Related Social Insurance (PRSI). The PSRI is
similar to U.S. Social Security payments and covers health and medical
care, social assistance, training, and unemployment benefits. There
are several classes and payment rates that apply. In general, for
workers in the industrial, commercial, and service sectors, a rate
of 6.5 percent is paid by the employer and 5.5 percent paid by the
employee on the first IR£21,500 of wages. Other rates apply
for different classes and income levels. Individual income tax is
chargeable on a sliding scale taking into account several factors
such as a personal allowance, PAYE payments, PRSI allowance, marital
status, number of dependents, and other exemptions or entitlements.
Taxable income is the total income after making various deductions.
Table 6
INDIVIDUAL INCOME TAX LIABILITIES
1996-1997
| |
ALLOWANCES |
|
Main Allowances
|
|
IR£
|
| Single Person |
|
2,650 + |
| Married Couple |
|
5,300 + |
| Widowed Person |
|
3,150 |
| PAYE |
|
800 |
| VHI |
Previous Year Premiums |
140 |
| Work Expenses |
|
As agreed |
| One Parent Family |
Single Person |
2,650 |
|
Widowed Person |
2,000 |
| Age Allowance |
Single |
200 |
|
Married |
400 |
| Existing Covenants |
|
5% limit on all covenants except
incapacitated child and elderly. No relief on covenants
to minors |
| Dependants (max) |
Dependent Relative |
110 |
|
Incapacitated child |
600 |
|
Employee to take care of incapacitated
persons |
5,000 |
|
TAX BANDS
|
|
| Single/Widowed |
IR£1-9,400 |
27% |
|
Balance |
48% |
| Married |
IR£1-18,800 |
27% |
|
Balance |
48% |
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Foreign Executives
An individual who lives or
visits Ireland and maintains a domicile (permanent home) there is
subject to Irish income tax on world-wide income. Any individual who
lives or visits Ireland, but does not have a permanent home there,
will be taxed on the income obtained in Ireland and the United Kingdom
as well as other income remitted to Ireland. Individuals who neither
live or visit Ireland nor maintain a permanent home there for any
tax year are liable only for Irish taxes on income earned in Ireland.
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Corporate Taxes
The tax on corporate profits
is levied on the world-wide profits of resident companies (those managed
and owned) in Ireland. For non-resident companies, such as an American
branch or subsidiary in Ireland, the corporate tax is levied on the
profits arising from the Irish operations. An American firm in the
Republic is taxed at the same rate as Irish firms.
Investors have the advantage of liberal
depreciation allowances, a low tax rate for manufacturing operations,
and certain preferences for specific commercial activities within
an enterprise zone, such as the Dublin Financial Centre.
Firms must also pay value-added taxes
(VAT), which are described in the "Trade Regulations"
section. The profits or losses for the purpose of corporate taxation
are based on the revenue of the firm adjusted by allowable expenses.
The tax is levied on the adjusted profits based on an accounting
period of 12 months. Some allowable business expenses will be familiar
to American accountants and include wages, raw materials, rents,
repairs to buildings and machinery, bad debts, travel, and advertising.
Other taxes are deductible such as VAT, PAYE, and capital gains.
Numerous allowances are provided for
depreciation of certain capital assets. The specific rates must
be arranged with the revenue service. Depreciation allowances are
permitted on equipment and machinery, buildings, expenditures on
patents and scientific research, and for the training of employees.
As a general rule, the standard percentage allowances on assets
are 4 percent for industrial buildings and from 10 to 25 percent
for other permitted assets.
Table 7
Business Tax Rates
Manufacturing activities 10%
Other corporations 38% (30% first £50,000)
Owner/partner/non corporation* 48%
* Taxed at the individual
rate
In addition to the incentive for manufacturing
of a reduced tax of 10 percent, other tax programs also are available
to encourage business development and job creation. Individuals
investing in certain manufacturing and tourist-related activities
can obtain tax relief under the Relief for Investment in Corporate
Trades.
Other tax benefits are available for investment in basic research
and development (R&D) companies that qualify under the specific
rules established to encourage R&D activity. Another tax program
provides for tax incentives for expenditures that encourage urban
renewal and development. Designated areas in Dublin, Cork, Limerick,
Tralee, and other cities have been established for such tax incentives.
One example of a favourable tax incentive area is the International
Financial Services Centre in Dublin, which has a 10 percent corporate
tax rate as well as capital allowances on plant and machinery. For
this specific project, qualifying firms must carry on banking, insurance,
or other international financial services in the designated area.
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Capital Gains
Tax
The sale or transfer
of an asset imposes a potential tax liability. The basic capital
gains tax is 30 percent to an upper range of 35 to 60 percent, depending
on length of ownership and type of asset. There are numerous exemptions
from the tax including a "roll-over" of business assets.
A replacement of the assets must be made in a period 12 months prior
to 36 months after the disposal to defer the capital gains tax.
If less than the entire proceeds from a sale is used to acquire
a new asset, then the tax is applied on a pro rata basis.
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