Value-added tax (VAT)
VAT is charged at the standard rate of 23%. This is the default rate of VAT that applies to the supply of goods and services in the course or furtherance of business unless the goods or services qualify for a reduced rate of VAT, the zero-rate of VAT, or are exempt from VAT.
Reduced VAT rates
There are currently two main reduced rates of VAT, being a reduced rate of 13.5% and a super-reduced rate of 9%. The 13.5% rate applies, inter alia, to the supply and development of immovable goods, labour-intensive services (e.g. certain repair and related services), energy products and supplies, and the supply of certain food and drink provided in the course of catering. The 9% rate is applicable to the provision of facilities for taking part in sporting activities and the supply of periodicals (e.g. magazines, newsletters and sectoral publications, etc). Finance (No.2) Act 2023 has further extended the temporary application of the 9% rate of VAT to the supply of electricity and gas (which is ordinarily subject to the 13.5% rate) until 31 October 2024.
Zero-rate of VAT
The zero-rate of VAT applies to, inter alia, the supply of goods dispatched from Ireland to a VAT-registered person in another EU member state (provided certain conditions are satisfied), goods exported from Ireland to a place outside of the European Union, the supply of certain food and drink of a kind used for human consumption, oral medicines, books and newspapers (printed and electronic), and children’s clothing and footwear.
Finance (No.2) Act 2023 brought the supply of the following within scope of the zero-rate of VAT:
- E-books and audiobooks;
- The supply and installation of solar panels on buildings used wholly or predominantly for the provision of school education.
Certain supplies are exempt from VAT. The exempt categories include certain activities in the public interest (e.g. postal services, medical and related services, education, and national broadcasting), financial services (e.g. certain banking services), insurance services, betting/gambling services, the letting of immovable goods (but an option to tax is possible, subject to certain conditions), and, by way of an Irish derogation from EU law, passenger transport services.
VAT registration thresholds
With effect from 1 January 2024, the thresholds below which a person is not obliged to register for Irish VAT have increased. The turnover thresholds (which relate to turnover in any continuous 12 month period for taxable persons with an establishment in Ireland) will be increased as follows:
- from €37,500 to €40,000 for the supply of services; and
- from €75,000 to €80,000 for the supply of goods (including for the supply of goods and services where at least 90% of the turnover is derived from the supply of goods).
CESOP (Central Electronic System of Payment Information): New EU Tax Information Reporting Requirements
The CESOP Directive (Council Directive (EU) 2020/284) entered into effect on 1 January 2024 and requires payment service providers (PSPs) located in the EU to collate electronic records on cross-border payments and report this data to relevant tax authorities in the EU. The aim is to address VAT fraud in the EU and will allow EU tax authorities to monitor payments made in respect of e-commerce transactions to ensure that they are taxed appropriately.
The CESOP Directive will only apply to cross-border payments (i.e. domestic payments are excluded) and only PSPs (as defined) are within scope of the reporting requirements. PSPs will be required to file a return on a quarterly basis to the tax authorities in the Member State of establishment or in the host Member State. The first reporting period will run from 1 January 2024 to 31 March 2024. The filing deadline for the first period will be 30 April 2024.
Ireland is part of the customs territory of the European Union. Goods imported into Ireland from countries outside the European Union (including Great Britain) are liable to customs duty at the appropriate rates specified in the EU’s Combined Nomenclature (CN) Tariff. These rates vary from 0% to 14% for industrial goods, with much higher rates applicable to agricultural products. Imports may qualify for a partial or full reduction in rates in specific circumstances (e.g. where products meet relevant rules of origin and are considered as ‘originating’ under one of the many Free Trade Agreements that the European Union has negotiated with third countries, such as the EU-UK Trade and Cooperation Agreement).
The three main elements (‘customs duty drivers’) that determine the duty liability arising on goods imported into the European Union from a non-EU country are (i) the product’s commodity code (Tariff Classification), (ii) its customs valuation, and (iii) its origin. Each of these elements will need to be considered when determining the customs duty cost at import.
There are special customs procedures that allow for the import of goods into the European Union from non-EU countries with full or partial relief from customs duty or under a suspension of customs duty. Examples of these are Temporary Admission, Customs Warehousing, Inward Processing Relief, and Outward Processing Relief. There are different conditions attached to each customs special procedure, and an analysis of the trade footprint of the importer of the goods will need to be considered in order to determine whether or not they may avail of one of these reliefs. Advance authorisation is generally required from Irish Revenue to use such special procedures. These procedures are important and are in place with the intention of stimulating economic activity within the European Union.
It should be noted that no customs duties arise on goods ‘imported’ from other EU member states (known as Intra-Community movements), provided the products are in ‘free circulation’ in another member state of the European Union.
Carbon Border Adjustment Mechanism (CBAM): The EU's new carbon charge
A new CBAM entered into effect in all EU member states sinceOctober 2023. The aim of CBAM is to mitigate against carbon leakage whereby companies based in the European Union import carbon-intensive products as part of their manufacturing processes that work against domestic measures introduced in the European Union to tackle carbon intensive manufacturing. It also will encourage more sustainable industrial production outside the European Union. The key products impacted by CBAM are cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.
The new measure is underpinned by Regulation (EU) 2023/956 CBAM will enter into force on a phased, transitional basis. The reporting obligations for the transitional phase are set out in Regulation (EU) 2023/1773. The transitional applies from 1 October 2023, and CBAM reports will be required on a quarterly basis until 31 December 2025. Annual declarations will then replace quarterly declarations from 1 January 2026, when the measures enter into force on a permanent basis (which will have a financial impact whereby impacted companies will be required to purchase CBAM certificates related to the amount of embedded carbon emissions in their imported products).
Excise duties are charged on mineral oils (including petrol and diesel) which includes a carbon charge component (see below), alcohol products (including spirits, beer, wine, cider, and perry), and tobacco products where they are consumed in Ireland. Reduced rates of excise duty may apply when setting up a microbrewery in Ireland (depending on production quantities). Similarly, Ireland has also introduced a relief for micro-producers of ciders and perry. Relief from alcohol products tax also applies to alcohol intended for use or to have been used in the production of flavours for the preparation either of foodstuffs or of beverages not exceeding 1.2% vol., medicinal products, vinegar, and other specified products.
In addition, a diesel rebate scheme applies in Ireland. It provides hauliers or coach/bus owners with an opportunity to claim a partial refund of excise duty paid on fuel used in specifically designated vehicles for the purposes of transporting goods or passengers.
Excise duties are not charged in Ireland on the export or sale of excisable goods to other EU countries, but special control arrangements apply to the intra-EU movement of such goods.
In addition, Ireland applies excise duties to electricity, betting (including so-called 'free bets' and discounted bets on what would have been the unit stake), natural gas and solid fuel in the form of a carbon charge (see below), sugar (see below), and the first registration of vehicles in the state (the latter is known as VRT). The VRT regime for motor vehicles is based on a CO2 emissions rating system and charged on the ‘open market selling price’ of the vehicle. A more robust system of calculating emissions was introduced with effect from 1 January 2021, to increase the VRT for vehicles with higher CO2 emissions. Specific reductions in VRT apply to electric and hybrid vehicles, subject to certain conditions being met. In addition, there are reliefs available for cars imported temporarily by non-residents, or imported on transfer of residence to Ireland (such VRT reliefs require prior approval from the Customs authorities). Penalties also apply for breaches of excise legislation.
Stamp duty is a tax on instruments. It is payable on transfers of land and on other assets where legal title cannot be passed by delivery. It is chargeable on instruments of transfer executed in Ireland and on instruments, wherever executed, that relate to Irish property or relate to matters done or to be done in Ireland. Stamp duty on the transfer of assets between associated companies may be fully relieved from stamp duty, provided the following key conditions are met:
- The companies have a 90% relationship (that is, one company is, directly or indirectly, the beneficial owner of at least 90% of the ordinary share capital of the other and is entitled to at least 90% of the profits available for distribution and at least 90% of the assets in the case of a winding-up of the other company, or a third company has these rights, directly or indirectly, in respect of both companies).
- This relationship is maintained for a period of at least two years after the transfer of the assets (to prevent the relief being clawed back). There are certain limited exceptions to this two-year association requirement.
There is an exemption for transfers of intellectual property (IP), and the categories of IP qualifying for this exemption are the exact same as those for which IP capital allowances are available (see Intellectual property [IP] regime in the Tax credits and incentives section).
Stamp duty is payable based on the higher of the consideration paid for the transfer or the market value of the assets transferring. Rates of 1% to 10% apply for transfers of residential property, 7.5% for transfers of non-residential property (commercial/industrial land and buildings, but also business assets, such as goodwill, debtors, contracts, etc.), and 1% on transfers of shares. A 7.5% rate applies for shares in certain companies deriving their value from Irish non-residential property, and a 10% rate applies for shares in certain companies deriving their value from Irish houses or duplexes, where particular circumstances exist.
Capital duty on share capital
Ireland does not levy capital duty on share capital of companies.
Ireland does not levy tax on the net worth of companies.
The ‘pay-as-you-earn’ system (PAYE system) places an obligation on employers to make deductions at source of income tax, universal social charge (USC), and pay-related social insurance (PRSI) from payments made to employees and an obligation to remit such deductions to the Irish tax authorities.
Pay-related social insurance (PRSI)
Employed persons are compulsorily insured under a state-administered scheme of PRSI. Contributions are made by both the employer and the employee. The employer is responsible for making PRSI contributions up to a rate of 11.05% and these are an allowable deduction for corporation tax purposes.
Levies on insurance policies
A levy of 3% of gross premiums received by insurers applies in respect of non-life insurance policies relating to risks located in Ireland. This levy is payable four times per annum, within 25 days of the end of each quarter (i.e. within 25 days from quarters ending 31 March, 30 June, 30 September, and 31 December).
An additional contribution of 2% to the Insurance Compensation Fund applies to premiums received in relation to non-life insurance policies. Similar to the 3% non-life insurance levy, the contribution applies where premiums are received in respect of risks located in Ireland. The contribution is also payable four times per annum in conjunction with the non-life insurance levy on premiums.
A levy of 1% of gross premiums received by insurers applies in relation to certain classes of life insurance policies relating to risks located in Ireland. This levy is payable four times per annum, within 25 days of the end of each quarter (i.e. within 25 days from quarters ending 31 March, 30 June, 30 September, and 31 December).
Reinsurance business is excluded from both of these levies.
There is also a stamp duty liability of EUR 1 on each new non-life insurance policy where the risk is located in Ireland.
A 1% contribution applies to all motor insurer premiums generated to directly fund the Motor Insurers’ Insolvency Compensation Fund (MIICF). The purpose of the MIICF is to build up a reserve fund, administered by the Motor Insurers’ Bureau of Ireland (MIBI), to ensure that outstanding policyholder claims can be met in the event that a motor insurer goes into liquidation. It is anticipated that the additional levy will be in place for several years in order to build up the necessary reserves totalling EUR 200 million. The levy was reduced from 2% to 1% on 1 January 2024 and, once fully funded, the rate is expected to reduce to 0%.
Certain voluntary health insurance policies are subject to risk equalisation fixed levies. Risk equalisation is a process that aims to equitably neutralise differences in insurers’ costs that arise due to variations in the age profile of the insured. The levies are updated regularly and currently (on or after 1 April 2023) range from EUR 36 to EUR 438 per policy, depending on your age profile and the type of coverage.
In Ireland, a levy of 22 cents per bag is imposed upon consumers provided with a plastic bag when purchasing goods in supermarkets and other retail outlets. Under the applicable legislation, retailers are obligated to collect 22 cents in respect of every plastic bag or bag containing plastic, regardless of size, unless specifically exempted, that is provided to customers and remit all plastic bag levies collected to Irish Revenue. As a result of the levy, most non-supermarket retailers provide paper carrier bags, and same retailers sell ‘bags for life’, which are made from non-plastic material and, therefore, not subject to the environmental levy.
On 1 February 2024 Ireland will introduce a Deposit Return Scheme. Under the scheme, when a customer purchases a plastic bottle, aluminium or steel can that features the Return log, the customer will pay a deposit of between 15 cent and 25 cent in addition to the price of the drink. When that empty, undamaged container is returned to any retail outlet, the customer will be refunded the deposit in full. The deposit payable depends on the size of the container.
Finance (No.2) Act 2023 provided for an increase of EUR 7.50 up from EUR 48.50 to EUR 56 per tonne of carbon dioxide emitted shall apply. A carbon tax is levied on mineral oils (e.g. auto fuels, kerosene) that are supplied in Ireland. The rate of carbon tax on oil and gas broadly equates to EUR 56 per tonne of CO2 emitted from 11 October 2023 for auto fuels and from 1 May 2024 for all other fuels, and the government has committed to increasing this to EUR 100 by 2030. Relief applies where mineral oils are supplied to an Emissions Trading Scheme (ETS) installation, to combined heat and power plants, or used for electricity generation. Pure biofuels are exempt from carbon tax. There is full relief for the biofuel component of the fuel. Where biofuel has been mixed or blended with any other mineral oil, the relief from carbon taxes shall apply to the biofuel content of the mixture or blend, regardless of the percentage.
A carbon tax is also levied on natural gas and solid fuel where supplied for combustion. Again, reliefs apply where these fuels are supplied to ETS installations or used in electricity generation, chemical reduction, or in the electrolytic or metallurgical processes.
Sugar Tax applies on a volumetric basis at one of the following rates:
- EUR 16.26 per hectolitre on drinks where the sugar content is five or more grams of sugar per 100ml.
- EUR 24.39 per hectolitre on drinks where the sugar content is eight or more grams of sugar per 100ml.
The exit tax applies not only to the migration of tax residence of a company from Ireland, but also in respect of certain transfers of assets from Ireland to other countries where the same company retains legal or economic ownership of those transferred assets. The provisions deem a company that is resident in an EU member state other than Ireland to have disposed of and immediately reacquired at market value:
- assets transferred by it from a PE in Ireland to its head office or to a PE in another country, or
- business assets transferred by it on the transfer of a business carried on by a PE in Ireland to another country.
The provisions also deem a company migrating its tax residence from Ireland to another EU member state or to a third country to have disposed of all of its assets (subject to certain exceptions) and to immediately reacquire them at market value.
The company is entitled to deduct the tax base cost held in the relevant assets in calculating the gain arising.
Subject to certain anti-avoidance rules, the tax rate applicable to any chargeable gain arising is 12.5%.
Exemption from the charge to exit tax may be available in respect of a range of assets, subject to certain conditions being met. These include:
- assets that remain situated in Ireland and are used in an Irish trade post migration
- assets that are given as security for a debt, assets that are transferred to satisfy capital requirements or for liquidity purposes, and assets that relate to the financing of securities, in circumstances where those assets are due to revert to the Irish PE or company within 12 months of the transfer, and
- certain ‘specified’ assets that remain within the charge to Irish capital gains tax post migration, including Irish land and buildings and unquoted shares deriving the greater part of their value from such assets.
An exception applies relating to interest on deferred payments of the exit tax. Companies have the right, in certain circumstances, to pay the exit tax in equal annual instalments over five years. Interest applies over the period of deferral. The amendment ensures that the calculation of interest on instalment payments operates as intended.
Local taxes, known as ‘rates’, are not based on income but rather are levied on the occupiers of business property by reference to a deemed rental value of the property concerned. The level of rates levied can depend on the region in which the property is located. Rates are an allowable deduction for corporation tax purposes.
Local authorities are also empowered to levy charges on all occupiers for specific services (e.g. water supply). These charges are also deductible for corporation tax purposes.