Ireland Corporate Tax 2026: 12.5% CIT Rate, VAT & Business Guide
How much tax does your company pay in Ireland in 2026? 12.5% corporate rate for trading income, 25% for passive income, 35% R&D tax credit, Pillar Two rules, and filing deadlines for every business type.
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Tax Residency and Rates
A company is tax resident in Ireland if it is incorporated in Ireland (since 1 January 2015) or if its central management and control is exercised in Ireland. Resident companies pay corporation tax on worldwide profits. Non-residents pay only on Irish-source trading profits of an Irish branch or agency, and on certain Irish income collected via withholding tax. The 12.5% rate applies to trading income; 25% applies to passive income such as rental income, interest, and most foreign dividends.
Irish residents: 12.5% on trading profits, worldwide income
Non-residents: Irish branch trading profits taxed at 12.5%
Passive income (rent, interest, most foreign dividends): 25%
Residency determined by incorporation date or place of central management
Capital gains tax: 33% on disposal of chargeable assets
Private Limited Company (LTD)
Trading Tax Rate
12.5%
Flat rate on trading profits
Passive Income Rate
25%
Rent, interest, foreign dividends
Minimum Capital
€1
No minimum share capital required
Most popular structure for SMEs and multinationals
Limited liability for shareholders
Separate legal entity
Dividend withholding tax 25% to non-residents
No residency requirement for shareholders
Sole Trader / Partnership
Income Tax Rate
20–40%
Progressive personal income tax
USC
0.5–8%
Universal Social Charge
PRSI
4.2%
Class S self-employed rate
Taxed as personal income, not corporation tax
No separate legal entity
Unlimited personal liability
Business expense deductions available
Suitable for freelancers and small businesses
Branch of Foreign Company
Tax on Irish Profits
12.5%
CIT on local trading income
Liability
Parent Company
Full parent responsibility
No WHT
On Branch Profits
Repatriated to parent
12.5% CIT on Irish-source trading profits only
Simplified registration vs. subsidiary
Parent company fully liable
No withholding tax on branch profit repatriation
Subject to full Irish tax compliance
Corporate Tax Rate Overview 2026
| Business Type | Tax Rate | Key Features |
|---|---|---|
| LTD / DAC (Trading Income) | 12.5% CIT | Limited liability, 25% dividend WHT to non-residents |
| LTD / DAC (Passive Income) | 25% CIT | Rent, interest, most foreign dividends |
| Sole Trader / Partnership | 20–40% income tax + USC + PRSI | Personal income tax, unlimited liability |
| Branch of Foreign Company | 12.5% CIT | Irish profits only, no branch WHT on repatriation |
| Knowledge Development Box (KDB) | 10% effective rate | Qualifying IP profits, patented inventions, copyrighted software |
Ireland has maintained its 12.5% trading rate since 2003. The rate is one of the lowest in the EU and a core pillar of Ireland's foreign direct investment strategy.
VAT (Value Added Tax) Rates and Rules
Standard and Reduced VAT Rates 2026
Ireland's VAT system has a 23% standard rate for most goods and services. A reduced rate of 13.5% applies to construction, property, certain energy supplies, and cleaning services. A 9% rate applies to tourism, hospitality, food services, newspapers, and hairdressing. A 0% rate covers food (excluding hot food), children's clothing, books, oral medicines, and certain agricultural supplies. VAT registration is required when annual turnover exceeds €85,000 for goods or €42,500 for services. Intra-EU acquisitions above €41,000 also require registration. Most businesses file VAT returns bi-monthly via the Revenue Online Service (ROS).
VAT Rate Structure 2026
| VAT Rate | Applies To | Examples |
|---|---|---|
| 23% (standard) | Most goods and services | Electronics, professional services, software, clothing (adults) |
| 13.5% (reduced) | Property, energy, certain services | Construction, fuel, electricity, cleaning, vet services |
| 9% (reduced) | Tourism and hospitality sector | Restaurants, hotels, hairdressing, newspapers, sport facilities |
| 0% (zero-rated) | Essentials and exports | Food, children's clothes, oral medicines, books, exports, intra-EU supplies |
VAT registration: €85,000 threshold for goods, €42,500 for services. Food/hospitality businesses saw the 9% rate restored from July 2025 after the temporary 13.5% period.
R&D Tax Credit Raised to 35% in 2026
Up from 30% — effective for accounting periods starting 1 January 2026
Corporate Tax Deductions and Incentives
R&D Tax Credit (35%)
35% fully refundable credit on qualifying research and development expenditure. Applies to systematic investigation in science or technology fields. Paid in three instalments. First-year payment threshold: €87,500. Companies can also use a portion of the credit to reward key R&D employees tax-efficiently.
Knowledge Development Box (KDB) — 10% Effective Rate
Ireland's OECD-compliant IP box regime. Qualifying profits from patented inventions and copyrighted software developed in Ireland are taxed at an effective 10% rate (via a 20% deduction from the standard 12.5%). KDB is available for accounting periods commencing before 1 January 2027. A review of the regime is underway in 2026.
Loss Carryforward
Trading losses can be carried forward indefinitely against future profits of the same trade. Current-year losses can also be set off against all income and profits in the same and prior accounting period. Group companies can surrender losses to other group members (75% group relationship required).
Start-Up Companies Relief
A corporation tax holiday applies to certain companies that commence trading between 2009 and 2026. Relief applies for three years where total annual corporation tax does not exceed €40,000. Marginal relief is available where tax is between €40,000 and €60,000. The relief amount is linked to employer PRSI paid.
Entrepreneur CGT Relief
Revised Entrepreneur Relief allows a 10% capital gains tax rate on disposal of qualifying business assets. From 1 January 2026, the lifetime limit increased from €1 million to €1.5 million. The shareholder must hold at least 5% of shares in a qualifying company for a continuous 3-year period.
Withholding Taxes in Ireland
Dividend Withholding Tax (DWT) and Other WHT
Dividend withholding tax (DWT) applies at 25% to dividends paid by Irish resident companies to both resident and non-resident recipients. However, broad exemptions exist. Irish resident companies are exempt from DWT (no declaration needed where the holding is above 51%). EU Parent-Subsidiary Directive: no DWT on distributions to qualifying EU parent companies. Payments to individuals or companies resident in a tax treaty country are also generally exempt. From 1 January 2026, dividends paid to qualifying EEA investment limited partnerships are exempt from DWT. Deposit Interest Retention Tax (DIRT) is charged at 33% on interest from deposit accounts. Interest withholding tax applies to annual payments at the standard 20% income tax rate, with wide exemptions for banks and certain non-residents.
Dividend WHT: 25% (broad exemptions for EU, treaty countries, Irish companies)
EU Parent-Subsidiary Directive: 0% for qualifying EU corporate shareholders
Interest WHT: 20% standard rate (wide banking and treaty exemptions)
DIRT (deposit interest): 33%
Royalty WHT: 20% (exemptions under EU Interest and Royalties Directive)
New 2026: EEA qualifying investment partnerships exempt from DWT
Pillar Two Global Minimum Tax
15% Global Minimum Tax for Large Groups
Ireland implemented the OECD Pillar Two global minimum tax framework via the Minimum Tax Act. It applies to multinational groups with consolidated revenues of €750 million or more in at least two of the four preceding fiscal years. Ireland introduced a Qualified Domestic Top-Up Tax (QDTT) to bring the effective Irish tax rate up to 15% for in-scope entities. The Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) also apply. In early 2026, the OECD released a Side-by-Side administrative guidance package, including new safe harbours and simplifications. Ireland has agreed to incorporate these into Irish law via Finance Act 2026. Most Irish SMEs are not affected by Pillar Two.
Applies to groups with €750M+ consolidated revenue
15% global minimum effective tax rate
QDTT prevents foreign top-up taxes from applying in Ireland
New OECD Side-by-Side guidance package to be enacted in Finance Act 2026
Transitional CbC safe harbour available
Does not affect the vast majority of Irish SMEs
Employer Social Contributions (PRSI)
Payroll Taxes and Employer Obligations 2026
Employers pay Pay Related Social Insurance (PRSI) at 11.25% on weekly wages above €552. A lower rate of 9% applies to wages of €552 or less per week. From 1 October 2026, the employer PRSI rate increases by 0.1% to 11.4% (higher rate) and 9.15% (lower rate), as part of a phased increase to fund the State Pension. Employee PRSI: 4.2% until 30 September 2026, then 4.35% from October. New from January 2026: mandatory pension auto-enrolment for employees aged 23–60 not already in a workplace pension. Employers must contribute 1.5% of gross salary alongside the employee's 1.5% contribution. A National Training Fund Levy is collected as part of employer PRSI.
Employer PRSI: 11.25% (above €552/week), rising to 11.4% from Oct 2026
Employer PRSI: 9% (€552/week or less), rising to 9.15% from Oct 2026
Employee PRSI: 4.2% until September 2026, then 4.35%
Pension auto-enrolment from Jan 2026: employer contributes 1.5% of gross salary
Universal Social Charge (USC): 0.5% to 8% on employee gross income
Corporate Tax Filing and Compliance
Filing Deadlines and Payment Procedures
Irish companies file their Corporation Tax return (Form CT1) nine months after the end of their accounting period. For a December 31 year-end, the CT1 and final tax payment are due by 23 September of the following year via the Revenue Online Service (ROS). Preliminary Corporation Tax must be paid in month 11 of the accounting period: by 23 November for December year-ends. Companies with prior-year tax below €200,000 can base preliminary tax on 100% of the prior year's liability. Large companies (prior-year liability above €200,000) must pay based on 90% of the current year or 100% of the prior year. Late payment attracts daily interest at 0.0219%. A late filing surcharge of 5% (up to €12,695) applies if filed within two months of deadline; 10% (up to €63,485) if later.
CT1 filing deadline: 23rd of the 9th month after year-end (via ROS)
Preliminary tax: due in month 11 of accounting period
VAT returns: bi-monthly, due by 23rd of the following month via ROS
PAYE real-time reporting: filed on or before every pay date
Late payment interest: 0.0219% per day
CRO Annual Return (Form B1): within 56 days of Annual Return Date
2026 Key Changes and Updates
R&D Tax Credit Raised to 35%
R&D tax credit increased from 30% to 35% for accounting periods starting on or after 1 January 2026. First-year payment threshold raised from €75,000 to €87,500. The Government published an R&D Innovation Compass in February 2026 outlining a medium-term roadmap for further reforms.
Pension Auto-Enrolment from January 2026
My Future Fund — the State's pension auto-enrolment scheme — launched 1 January 2026. Employees aged 23–60 not in a workplace pension are automatically enrolled. Employer and employee each contribute 1.5% of gross salary, topped up by the State. Contributions increase over time.
PRSI Rate Increases in October 2026
From 1 October 2026, employer PRSI rises to 11.4% (higher rate) and 9.15% (lower rate). Employee PRSI rises to 4.35%. Part of a phased multi-year programme to fund State Pension sustainability as the population ages.
Entrepreneur CGT Relief Lifetime Limit Doubled
From 1 January 2026, the Revised Entrepreneur Relief lifetime limit on qualifying gains eligible for the 10% CGT rate increased from €1 million to €1.5 million. Encourages founders to reinvest capital in new Irish businesses.
Pillar Two OECD Side-by-Side Package
Ireland agreed to the OECD Side-by-Side administrative guidance package in early 2026, including new safe harbours and simplifications. Measures will be enacted in Finance Act 2026. Affects large multinational groups above €750 million revenue.
Dividend Participation Exemption Widened
Changes in Finance Act 2025 widened the participation exemption for foreign dividends. From 1 January 2026, the look-back period for residency conditions on distributing companies was reduced from five years to three years. EEA qualifying investment partnerships are now exempt from dividend withholding tax.
Frequently Asked Questions
What is the corporate tax rate in Ireland for 2026?
The standard corporation tax rate for trading income in Ireland is 12.5% in 2026 — unchanged since 2003. This rate applies to profits from active business operations. Passive income (rent, interest, most foreign dividends) is taxed at 25%. Ireland has maintained this rate despite global pressure and continues to use it as a key tool to attract foreign direct investment.
How is an Irish LTD company taxed compared to a sole trader?
An Irish Private Limited Company (LTD) pays 12.5% corporation tax on trading profits. A sole trader pays personal income tax at progressive rates of 20% and 40%, plus Universal Social Charge (0.5%–8%) and PRSI (4.2%). For profits above €40,000–50,000, incorporation typically saves tax. An LTD also has limited liability, which a sole trader does not.
What is the R&D tax credit in Ireland for 2026?
The R&D tax credit is 35% of qualifying R&D expenditure for accounting periods starting on or after 1 January 2026 (up from 30%). The credit is fully refundable — companies receive cash if the credit exceeds their tax liability. Claims of €87,500 or less are paid in full in year one. Larger claims are paid over three years: 50% in year one, 30% in year two, 20% in year three.
What is the Knowledge Development Box (KDB)?
The KDB is Ireland's IP box regime. It gives an effective 10% corporation tax rate on profits from qualifying intellectual property assets — patented inventions and copyrighted software developed in Ireland. Companies claim a 20% deduction from their qualifying profits, reducing the effective rate from 12.5% to 10%. The KDB is available for accounting periods commencing before 1 January 2027. A review of the regime is planned during 2026.
What are the VAT registration thresholds in Ireland 2026?
VAT registration is required when annual turnover exceeds €85,000 for the supply of goods or €42,500 for services. Intra-EU acquisitions above €41,000 also require VAT registration. Foreign businesses must often register from their first taxable transaction in Ireland. Most businesses file VAT returns bi-monthly via ROS by the 23rd of the month following the period.
How are dividends taxed in Ireland?
Irish resident companies receive dividends from other Irish companies tax-free (franked investment income). Dividends paid to non-resident individuals or companies attract a 25% withholding tax. Broad exemptions apply: EU Parent-Subsidiary Directive (0% for qualifying EU parents with 5%+ shareholding), treaty country recipients, and publicly listed companies. From 2025, a participation exemption covers qualifying foreign dividends where the Irish company holds at least 5% of the foreign subsidiary for 12 months.
When is the corporation tax return due in Ireland?
The Form CT1 corporation tax return is due nine months after the end of the accounting period, by the 23rd of that month if filed via ROS (Revenue Online Service). For a 31 December year-end, the deadline is 23 September of the following year. Preliminary corporation tax must be paid in month 11 of the accounting period — by 23 November for December year-ends. All filing is mandatory through ROS.
Does Pillar Two affect most Irish companies?
No. Pillar Two only affects large multinational groups with consolidated global revenues above €750 million. Most Irish SMEs, startups, and mid-size companies are not in scope. For those that are in scope, Ireland's Qualified Domestic Top-Up Tax (QDTT) ensures the effective Irish rate reaches 15%, so foreign group members do not need to pay top-up taxes in respect of Ireland.
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