The rates
| Type of income | Rate |
|---|---|
| Trading income | 12.5% |
| Non-trading income — rental, investment, interest | 25% |
| Income from an excepted trade, such as dealing in land or mineral extraction | 25% |
| Capital gains within a company | Effectively 33%, by adjusting the gain before applying 12.5% |
Large multinational groups within the scope of the OECD Pillar Two rules are subject to a 15% minimum effective rate. That regime applies to groups with consolidated revenues above €750 million and has no practical bearing on Irish SMEs, which continue to pay 12.5% on trading profits.
What counts as trading
The 12.5% rate applies only to trading income, and the distinction carries a doubled tax rate. Trading means carrying on a business with commercial substance in Ireland: people, decisions and activity, not just a registered address.
Rent from an investment property is not trading. Interest on deposits is not trading. Dividends from investments are not trading. Owner-managed companies that accumulate cash and put it on deposit quietly generate 25% income without noticing.
A company can have both. Trading profits at 12.5% and rental profits at 25% sit in the same CT1 and are computed separately. Mixing them up is one of the more common errors in small company returns.
Filing and paying
The CT1 return and any balance of tax are due nine months after the end of the accounting period. Where the period ends on or after the 21st of a month, the deadline is the 21st of the ninth month following, extended to the 23rd where the return is filed and paid through ROS. Electronic filing is mandatory.
A company with a 31 December 2025 year end therefore files and pays by 23 September 2026.
Preliminary tax comes first
Preliminary corporation tax is paid before the accounting period has even ended, which is counterintuitive the first time a company encounters it.
- Small companies — those whose corporation tax liability for the preceding period did not exceed €200,000 — pay 100% of that prior-year liability in one instalment, due by the 23rd day of the month before the period end.
- Large companies pay in two instalments: the first in month six of the period, the second by the 23rd of the month before the period end, bringing the total to 90% of the current period's liability.
- A company in its first accounting period is not required to pay preliminary tax if it pays the full liability with the CT1.
Close company surcharges
Most Irish owner-managed companies are close companies — broadly, companies controlled by five or fewer participators, or by their directors. Two additional charges apply to them, and both are designed to stop profits being sheltered in a company indefinitely.
The investment and rental income surcharge
An additional 20% surcharge applies to undistributed investment and rental income. The charge is avoided by distributing the income within eighteen months of the end of the accounting period.
The professional services surcharge
A service company carrying on a profession faces a 15% surcharge on half of its undistributed professional income. This catches consultancies, practices and other professional service companies that retain profit, and it is frequently missed until an adviser looks at the structure.
Reliefs worth knowing
Start-up relief for new companies
Section 486C relief can reduce or eliminate corporation tax for the first five years of a new trading company, capped by reference to the employer PRSI paid on its employees. It is a genuine relief for companies creating jobs, and it is worth checking eligibility in year one rather than discovering it in year four.
Research and development tax credit
The R&D tax credit was increased to 35% of qualifying expenditure in Budget 2026, with the first-year payment threshold raised from €75,000 to €87,500. It sits on top of the ordinary deduction for the same costs.
Losses
Trading losses can be set against other profits of the same period, carried back against the preceding period of equal length, or carried forward indefinitely against future profits of the same trade. Losses can also be surrendered to other Irish group companies under group relief. Filing a CT1 late can restrict the use of losses and group relief, which is a further reason not to miss the deadline.
Taking money out of the company
Corporation tax is only the first layer. Money extracted from the company is taxed again in the hands of the person receiving it, and how you extract it changes the outcome materially.
| Method | Treatment |
|---|---|
| Salary | Deductible for the company; taxed under PAYE with USC and PRSI on the individual |
| Dividend | Not deductible for the company; taxed on the individual at marginal rates with dividend withholding tax applied at source |
| Pension contribution | Deductible for the company, and not a benefit in kind on the individual within limits |
| Director's loan | Attracts a notional interest benefit in kind, and a 20% income tax charge on the company under close company rules |
The last row is the trap. Taking cash out of a company without processing it as salary or a dividend does not make it untaxed; it makes it a director's loan, with its own charges attached and a disclosure in the financial statements.