Small Business Tax in Ireland Confirm the cited source.

Ireland's tax framework for small businesses balances a genuinely low headline corporation tax rate against a set of structural levies — close-company surcharges, USC, PRSI, and VAT — that require careful compliance management. The information below summarises the principal rates and rules as of 2025-2026; individual circumstances vary and a qualified tax professional or accountant should be consulted before making decisions.

01What corporation tax rate applies to Irish trading companies?

Ireland operates a two-rate corporation tax system under the Taxes Consolidation Act 1997 (TCA 1997). The 12.5% trading rate applies to profits of a trade carried on in Ireland under Schedule D Case I (trade) or Case II (profession). This rate has applied since 2003 and is among the lowest in the OECD [1]. The 25% non-trading rate applies to passive income: rental income not arising from a trade, investment income, foreign-source dividends (where not derived from an active trade), royalties from non-trade intellectual property, and income from certain land transactions and mineral exploitations [1]. Correctly characterising income as trading versus non-trading is therefore the central substantive question for most Irish SMEs. Revenue's guidance and extensive case law examine profit motive, regularity of activity, substance of operations, and the link to an identifiable business.

The table below summarises the core Irish business tax rates:

02Does the OECD Pillar Two 15% minimum rate affect Irish SMEs?

Ireland enacted the OECD Pillar Two framework in Finance (No. 2) Act 2023, effective for fiscal years beginning on or after 31 December 2023 [2]. The rules impose a minimum 15% effective tax rate on a jurisdiction-by-jurisdiction basis. Scope is limited to multinational enterprise (MNE) groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years. Ireland introduced a Qualified Domestic Top-up Tax (QDTT) so that any top-up owed by Irish-based entities of in-scope groups accrues to the Irish exchequer rather than being collected by a foreign parent jurisdiction. The Income Inclusion Rule (IIR), applying from 1 January 2024, means Irish parent companies of undertaxed foreign subsidiaries may owe additional tax. The Undertaxed Profits Rule (UTPR), the backstop mechanism, took effect from 1 January 2025. Genuine Irish SMEs are entirely outside the Pillar Two scope and continue to benefit from the 12.5% trading rate without any minimum-tax top-up obligation [2].

03How are sole traders and self-employed individuals taxed in Ireland?

Sole traders and self-employed professionals are not subject to corporation tax. Instead, profits are charged to income tax under the self-assessment regime, filed annually via Form 11 through Revenue Online Service (ROS). The standard income-tax rate is 20% on profits within the standard-rate band (EUR 44,000 for a single individual in 2025). Profits above that threshold are taxed at 40% [3]. Three additional charges layer on top:

• Universal Social Charge (USC): Graduated rates from 0.5% (income up to EUR 13,000 exempt) through 2%, 4.5%, and 8% for higher bands. Self-employed individuals with income above EUR 100,000 pay a 3% USC surcharge on the excess, bringing the marginal USC rate to 11% on that slice [3].
• Class S PRSI: 4.2% (from 1 October 2025, up from 4.1%) on total income, subject to a minimum annual contribution of EUR 650 where net income is at least EUR 5,000 [3].
• Preliminary tax: Self-employed individuals must pay 100% of the prior-year liability (or 90% of the current-year estimate) by 31 October each year.

The Form 11 filing deadline is 31 October for the prior tax year; filing and payment through ROS typically attracts a short extension to mid-November [3].

04What is the Section 486C Start-Up Relief for new companies?

Section 486C TCA 1997 provides corporation-tax relief for new Irish trading companies for their first five years of trading [4]. The relief covers companies that begin trading between 1 January 2009 and 31 December 2026 (the sunset date has been extended multiple times, most recently in Finance Act 2024). Key terms:

• Full relief: Where a company's corporation-tax liability in a year does not exceed EUR 40,000, the full liability is reduced to nil.
• Partial (marginal) relief: Where the liability falls between EUR 40,000 and EUR 60,000, proportionate relief applies on a sliding scale.
• PRSI linkage: The amount of relief available is capped by the employer's PRSI contributions remitted in respect of employees, subject to a per-employee cap of EUR 5,000 and an overall annual cap of EUR 40,000. From 2025, a further EUR 1,000 per director of Class S PRSI contributions may also be taken into account [4].
• Anti-recycling rule: The relief cannot apply where the new trade is a successor to, or continuation of, an existing trade carried on by another entity.
• Carry-forward: Unused relief in years where profits were insufficient may be carried forward within the five-year qualifying window.

A company with five employees paying average employer PRSI of EUR 4,000 each generates EUR 20,000 of PRSI headroom — sufficient to shelter up to EUR 20,000 of corporation-tax liability, shielding EUR 160,000 of trading profit from tax at the 12.5% rate.

05What is the close-company surcharge and who does it affect?

A close company is broadly one controlled by five or fewer participators (or any number of director-participators). Revenue confirms that most Irish-resident companies are close companies [5]. Two surcharges apply on top of the standard corporation-tax liability where income is retained rather than distributed:

• 20% surcharge on undistributed after-tax estate and investment income (dividends received, rental income, interest). This surcharge is reduced where the relevant income is distributed within 18 months of the end of the accounting period in which it arises. An exemption applies where the excess of distributable income over distributions is EUR 2,000 or less [5].
• 15% surcharge on one-half of the undistributed trading income of close service companies (companies carrying on a profession or providing professional services) [5].

The close-company surcharge is reported on the Form CT1 return and is collected as part of the corporation-tax liability for the subsequent accounting period. Owner-managed service firms — solicitors, architects, engineers, IT consultants — commonly need to review distribution timing before each year-end to manage surcharge exposure.

06When must an Irish business register for VAT?

VAT registration became mandatory from 1 January 2025 at the following thresholds, raised in Budget 2025 [6]:

• EUR 85,000 for persons supplying goods (increased from EUR 80,000)
• EUR 42,500 for persons supplying services only (increased from EUR 40,000)

Revenue monitors any rolling 12-month period, not the calendar year. Crossing either threshold obligates immediate registration. The standard VAT rate is 23%. Reduced rates include 13.5% (construction-related services, certain fuels), 9% (electricity and gas), and 0% (food, oral medicines, printed books, children's clothing) [6]. Businesses below the threshold may register voluntarily to reclaim input VAT on purchases — a common choice for B2B-only suppliers whose customers can also recover VAT.

For the broader Irish tax landscape, see the Ireland country overview. To find a Chartered Accountant Ireland (CAI) or CPA Ireland member who handles corporation-tax returns, close-company compliance, VAT filings, and start-up reliefs, browse the TaxPros Rated directory. Each situation is different — a qualified tax professional or accountant should review the specific facts before any filing or structural decision is made.