As a company operating in Ireland, it is crucial that you have a clear understanding of your tax obligations to ensure full compliance and to avoid Revenue imposed penalties. One such obligation is preliminary tax, which requires companies to estimate and pay their Corporation Tax in advance. In this blog post, we will guide you through the key aspects of preliminary tax in Ireland and help you understand this important responsibility.
What is Preliminary Tax?
Essentially, preliminary tax is an advance payment of your company’s estimated corporation tax liability for a specific accounting period. It serves as a way to prepay an amount of your expected tax liability to the Irish Revenue Commissioners.
Calculating Preliminary Tax
The calculation of preliminary tax is typically based on either 100% of the Corporation Tax liability from the preceding accounting period or 90% of the estimated Corporation Tax for the current period.
Timing and Payment
Small companies must pay their preliminary tax in one instalment if they have a Corporation Tax liability of less than €200,000 in their previous accounting period. This must be made 31 days before the end of their accounting period, and before the 23rd of that month. For example, if you have an accounting year end of 31 December, and you are deemed a small company (corporation tax liability of less that €200,000 in previous year), you will be obliged to pay your preliminary tax by 23rd November.
Large companies (i.e. a company whos Corporation Tax liability was above €200,000 in the previous accounting period) can pay their preliminary tax in two instalments when their accounting period is longer than seven months. The first instalment is due on the 23rd of the sixth month of the accounting period. The amount due is either:
- 50% of the CT liability for the previous accounting period
- 45% of the CT liability for the current accounting period
The second instalment is due on the 23rd of the eleventh month.
New or Start Up Companies
New or start up companies do not have to pay preliminary tax for their first accounting period if they have a Corporation Tax Liability that is less than €200,000.
FLC Frank Lynch & Co are here to help you stay informed about the rules and help you maintain compliance to ensure a smooth financial journey for your company.
If you would like to discuss this with our team, please call our office on 0429332273 or email email@example.com.