A Guide to Corporation Tax in Ireland

Corporation tax is the tax a company pays on its profits, and getting it wrong is expensive in a way that is entirely avoidable. Miss the filing deadline by a day and you can lose part of your reliefs and pick up a surcharge. Underpay your preliminary tax and interest starts running. The rules in Ireland are not complicated once you understand the shape of them, but they are unforgiving about dates. This guide walks you through the rates, the deadlines, the CT1 return, and the reliefs that matter to an Irish trading company.

What is corporation tax in Ireland and who pays it?

Corporation tax is a tax on the profits of companies. It covers trading profits, passive income such as rent and interest, and chargeable gains. If you run a limited company in Ireland, this is the tax that applies to what the business earns, in the same way income tax applies to an individual.

A company resident in Ireland is liable to Irish corporation tax on its worldwide profits. A company resident outside Ireland but trading here through a branch or agency pays corporation tax on the profits connected with that Irish activity. Residency usually turns on where the company is incorporated, with a separate test based on where central management and control sits. If your company is incorporated in Ireland, the default position is that it is tax resident in Ireland, subject to limited exceptions under double tax treaties.

Irish corporation tax runs on self-assessment. You calculate the tax, file the return, and pay, all without Revenue telling you the figure first. Revenue then reviews and can open a compliance check or audit later, so the accuracy of your own computation is what stands between you and a problem down the line.

What corporation tax rates apply in Ireland?

Ireland operates more than one rate, and the rate that applies depends entirely on the nature of the profits, not on the size of the company. The headline 12.5% figure is the trading rate, and it is the one most owner-managed businesses deal with.

Type of profit	Rate	Typical examples
Trading income (active business)	12.5%	Profits from a genuine trade or profession carried on in Ireland
Non-trading and passive income	25%	Rental income, deposit interest, foreign income, dividends from certain sources, dealing in land
Chargeable gains	Effectively 33%	Gains on disposals of assets, recalculated to the capital gains tax rate
Large in-scope groups (Pillar Two)	15% effective	Groups with global turnover over EUR 750 million

The 12.5% standard rate has applied to trading income since 2003 and is the rate that earned Ireland its reputation as a low corporate tax location. The 25% rate is the one that catches people out. It applies to passive and non-trading income such as rental profits, interest, and certain foreign income, which Revenue groups under Case III, Case IV and Case V of Schedule D. Profits from working minerals, petroleum activities, and dealing in or developing land also sit at 25%. Revenue sets out the rate of corporation tax and the basis of charge in its guidance on the charge to corporation tax.

So a single company can pay tax at more than one rate in the same accounting period. A trading company that also rents out a spare unit pays 12.5% on its trade and 25% on the rent. Classifying income correctly is the heart of an accurate calculation.

Who pays the 15% rate under Pillar Two?

Since 1 January 2024, Ireland has applied a minimum effective tax rate of 15% to very large groups, in line with the OECD agreement and the EU Minimum Tax Directive. This is part of a global tax reform aimed at setting a floor under corporate tax rates internationally.

The 15% rate is not a new standard corporate tax rate. It applies only to multinational and large domestic groups with global annual turnover above EUR 750 million in at least two of the four preceding years. Where such a group's effective rate in Ireland falls below 15%, a top-up tax, known as a qualified domestic top-up tax, is added to bring it up to the minimum effective tax rate. The Department of Finance confirmed the position when the rules took effect in its statement on the effective 15% rate for in-scope businesses.

For the majority of Irish companies, nothing changes. The government has confirmed that over 99% of companies operating in Ireland remain outside the scope of the global minimum effective tax rate and continue to pay the 12.5% trading rate. If your turnover is well below EUR 750 million, the domestic top-up tax does not apply and the top-up tax due is simply not part of your world.

What is the basis of charge and what counts as an accounting period?

Corporation tax is charged by reference to an accounting period, not a tax year. An accounting period normally matches the period for which you prepare your accounts, and it can never be longer than twelve months for corporation tax purposes. If your accounts cover a longer stretch, for example after a change of year-end, that period is split into two: the first twelve months and the remainder.

The basis of charge is the set of rules that decides which profits fall within the charge to Irish corporation tax and over what period. Within an accounting period you bring together trading profits, other income such as rent and interest, and any chargeable gains, then apply the relevant rate to each.

Taxable profit is rarely the same number as your accounting profit. You start with the profit in your accounts and adjust it. Some costs, such as client entertainment or general provisions, are not tax-deductible and are added back. Capital allowances are then given on qualifying expenditure such as plant, machinery and certain buildings, which is how the tax system grants relief on capital expenditure over time rather than all at once. The result is your taxable profit, which is what the rate is applied to.

How is corporation tax calculated in Ireland?

The calculation follows a consistent order. Working through it methodically is what keeps your computation defensible if Revenue ever asks to see your workings.

• Start with the profit or loss for the accounting period from your accounts.
• Separate trading income from non-trading and passive income, because they carry different rates.
• Add back expenses that are not tax-deductible and remove income taxed elsewhere.
• Claim capital allowances and any available tax deduction for qualifying expenditure.
• Apply the 12.5% rate to trading profits and the 25% rate to passive income.
• Add any chargeable gains, recalculated to the capital gains tax basis.
• Deduct tax credits such as the R&D tax credit to arrive at the corporation tax due.

A worked example makes the split-rate point clear. Suppose a company has EUR 200,000 of trading profit and EUR 20,000 of rental income. The trade is taxed at 12.5%, giving EUR 25,000. The rent is taxed at 25%, giving EUR 5,000. The total tax on profits is EUR 30,000 before any reliefs or credits, and the blended effective tax rate sits above the headline 12.5% because the company has both trading and non-trading streams.

The most common error is misclassifying income. Treating rental income as trading income to capture the lower rate of 12.5% is not a position Revenue accepts, and it is the kind of thing that surfaces in a compliance check. Keep a clear reconciliation from your accounts to your tax computation, and document the basis for every judgement around trading versus non-trading classification.

The CT1 return and the pay-and-file deadline

Every company within the charge files a corporation tax return on Form CT1 through Revenue Online Service, known as ROS. The return reports your income, your adjustments, your tax due, and your reliefs and credits for the accounting period.

The pay-and-file deadline is nine months after the end of your accounting period, but on or before the 23rd day of that ninth month when you file and pay through ROS. So a company with a 31 December 2025 year-end must file its CT1 and pay any balance by 23 September 2026. Revenue sets out the mechanics on its corporation tax payment and filing page.

Before you start the return, have your year-end accounts, your tax computation, details of preliminary tax already paid, and your company details to hand. Filing through ROS is straightforward once those are ready; it is the preparation, not the submission, that takes the time.

Accounting period end	CT1 return and balancing payment due
31 December 2025	23 September 2026
31 March 2026	23 December 2026
30 June 2026	23 March 2027

Preliminary corporation tax: small versus large companies

You do not wait until the return to pay. Preliminary tax is a payment on account made during the accounting period, and the rules differ depending on whether you are a small or large company.

A small company is one whose corporation tax liability in the previous accounting period was EUR 200,000 or less. Small companies pay preliminary tax in a single instalment, due 31 days before the end of the accounting period and on or before the 23rd of that month. They can base the payment on 100% of the prior year's liability, which removes the guesswork.

A large company, with a prior-period liability above EUR 200,000, pays in two instalments. The first is due in the sixth month of the accounting period, by the 23rd, covering at least 45% of the current period's liability or 50% of the prior period's. The second is due in the eleventh month, by the 23rd, bringing the total up to 90% of the final liability. Revenue's guidance on preliminary corporation tax sets out the detail. If you pay too little, interest applies on the shortfall, so estimating from up-to-date management accounts is well worth the effort.

Penalties, interest and the late filing surcharge

The corporation tax system separates late payment from late filing, and both carry a cost.

Late payment attracts interest at a daily rate of 0.0219% until the balance is cleared. Late filing is worse, because a missed CT1 deadline triggers a surcharge calculated on the tax due, not just on the amount outstanding. File within two months of the deadline and the surcharge is 5% of the tax due, capped at EUR 12,695. File more than two months late and it rises to 10%, capped at EUR 63,485. A late return can also restrict valuable reliefs such as loss relief and group relief, which can dwarf the surcharge itself.

Most late-filing problems trace back to the same triggers: wrong accounting period dates, misclassified income, payment left until ROS or bank cut-offs work against you, or weak documentation behind the positions taken in the computation. A tax calendar with reminders, a second-person review before submission, and tidy supporting schedules remove almost all of this risk.

Close company surcharges

Most Irish private companies are close companies, meaning they are controlled by five or fewer participators or by their directors. Close company status brings an extra layer of corporation tax rules designed to stop owners from leaving passive income to roll up inside the company at the lower rate rather than drawing it out and paying personal tax.

A surcharge of 20% applies to the undistributed after-tax investment and rental income of a close company, charged on the excess of that income over distributions made. There is an exemption where the excess is EUR 2,000 or less, and the surcharge falls away to the extent income is distributed within 18 months of the period end. A separate 15% surcharge applies to half of the undistributed trading income of a close service company. Revenue explains the mechanics in its guidance on the surcharge on undistributed income. The surcharge is reported on the CT1 of the following accounting period, so it is easy to overlook until it lands.

Reliefs that reduce your corporation tax

The Irish corporation tax regime offers targeted reliefs and tax incentives that can materially lower the amount of tax you pay. Two stand out for growing companies.

• Section 486C start-up relief. New companies can claim relief from corporation tax in their first five years of trading. Full relief is available where the corporation tax due for the year is EUR 40,000 or less, with marginal relief tapering between EUR 40,000 and EUR 60,000. The relief is now linked to the employer's PRSI paid, which ties the benefit to job creation.
• R&D tax credit. For accounting periods commencing on or after 1 January 2024, the research and development tax credit is given at 30% of qualifying expenditure, and it is payable even if you have no corporation tax liability to offset it against. Revenue sets out the conditions in its guidance on the R&D corporation tax credit.

Other reliefs exist around capital expenditure, intellectual property, and the Knowledge Development Box, but start-up relief and the R&D credit are the two most Irish SMEs should check first, and the ones most often left unclaimed because the conditions are not understood at filing time.

How Ireland's corporate tax system compares internationally

Ireland's corporation tax sits at the centre of the international tax framework. The combination of a low corporate tax rate of 12.5% on trading income, an extensive network of tax treaties, and a stable set of tax rules has made the country a base for global operations, and corporation tax receipts now make up a significant share of national tax revenue.

The shift to a 15% effective rate for the largest groups under Pillar Two is Ireland's response to international tax reform, keeping the country compliant with the global minimum effective tax rate while preserving the 12.5% rate for everyone else. For the typical company operating in Ireland, the trading rate that has applied since 2003 is intact, and the changes affect a small number of very large multinationals rather than the domestic base.

Get your corporation tax right before it costs you

Corporation tax rewards companies that treat it as a year-round discipline rather than a nine-month scramble. The rates are clear, the deadlines are fixed, and the reliefs are generous, but the penalties for getting the dates or the classifications wrong are real and avoidable. The hard part is rarely the arithmetic; it is the judgement around what is trading, what is passive, what is deductible, and what relief you qualify for.

Kinore is a digital-first, senior-led accountancy firm with dedicated client managers who handle corporation tax for ambitious Irish companies day in, day out. We will check your computation before it goes near ROS, get your preliminary tax estimate right, and make sure the reliefs you are entitled to are actually claimed. If you would rather know your CT1 is correct than hope it is, talk to our team and we will take it from here.

How do I know if my profits are taxed at 12.5% or 25%?

It depends on whether the income is trading or non-trading. Profits from an active trade carried on in Ireland are taxed at 12.5%, while passive income such as rent, interest and certain foreign income is taxed at 25%. A single company can pay both rates in the same period, so if your income streams are mixed it is worth confirming the classification before you file.

Do limited companies pay 12.5% corporation tax in Ireland?

Yes, on their trading profits. An Irish limited company carrying on a genuine trade pays corporation tax at the 12.5% rate on those trading profits. Any passive or non-trading income the same company earns is taxed at 25%, and chargeable gains are taxed at the capital gains tax rate, so the overall rate of tax can be higher than 12.5% depending on the mix.

What is preliminary corporation tax and what happens if I underpay it?

Preliminary tax is a payment on account of your corporation tax, paid during the accounting period rather than after it. Small companies pay it in one instalment and large companies in two. If you underpay, Revenue charges interest at a daily rate of 0.0219% on the shortfall, so accurate forecasting from current management accounts matters.

Do I pay corporation tax if my company is incorporated in Ireland but trades abroad?

Generally yes. A company incorporated in Ireland is usually tax resident in Ireland and liable to Irish corporation tax on its worldwide profits, subject to the terms of any relevant double tax treaty. Where profits are taxed both here and abroad, tax treaties and relief mechanisms can prevent double taxation, but the facts of your structure decide the outcome, so specialist advice is sensible for cross-border arrangements.

Can Revenue review my corporation tax calculation after I file?

Yes. Irish corporation tax is self-assessed, so you calculate and file first, and Revenue can carry out a compliance check or audit afterwards. This is why clear records, a clean reconciliation from accounts to computation, and documented reasoning for your tax positions are so important; they are what you rely on if your return is ever queried.

The information provided in this article is for general guidance and informational purposes only. It does not constitute professional accounting, tax, or financial advice, and should not be relied upon as a substitute for advice tailored to your specific circumstances. While we take care to ensure the content is accurate and up to date at the time of publication, legislation, tax rates, thresholds, and compliance requirements in Ireland can change.