Understanding your tax as a business owner

If you own a business in Ireland, you must make sure your business is tax compliant and that you make tax returns annually. The type of tax you pay depends on whether you register as a sole trader, partnership or company.

This page outlines the tax obligations you must meet as a sole trader or partnership in Ireland.

Companies are treated differently to sole traders and partnerships for tax purposes. This is because a business that’s registered as a company is a separate legal entity (it is separate from the person or partners who run it). You can find information on tax for companies on Revenue’s website.

You must register for tax with Revenue when you:

• Become a sole trader
• Set up a partnership
• Start a new company

Sole trader

As a sole trader, you must pay Income Tax, PRSI and USC on your net profits.

You must have a Personal Public Service (PPS) number to register with Revenue. After you register, your Tax Reference Number (TRN) will be the same as your PPSN. Read about how to register for tax as a self-employed person.

Partnership

Each partner in a partnership must pay income tax, PRSI and USC on their share of business profits.

If your partnership is represented by a tax agent, they must apply online through the Revenue Online Service (ROS). If your partnership is not represented by a tax agent, you must complete a Form TR1 (pdf). You will be given a Tax Reference Number to use when trading and filing your tax returns.

Company

Companies must pay corporation tax, income tax, PRSI and USC on its profits. See Revenue’s website for information on tax for companies.

When you register with Revenue as a self-employed person, you pay income tax, Pay Related Social Insurance and the Universal Social Charge (USC) under the self-assessment system.

You must submit your tax return on or before 31 October each year. If you pay and file your tax return online using the Revenue Online Service (ROS), the deadline is usually slightly later.

How do I pay and file my tax return under self-assessment?

Use the Revenue Online Service (ROS) to complete an Income Tax Return (Form 11).

You must:

• Pay your preliminary tax for that year
• File your annual tax return for the previous year
• Pay any balance of tax due for the previous year

Preliminary tax is your estimate of income tax, PRSI and USC that you expect to pay for a full tax year.

How much tax do I have to pay and file if I am self-employed?

Income tax

The amount of tax that you pay depends on the amount of income you earn and on your personal circumstances. See our page on how your income tax is calculated for more information.

USC

You must pay the Universal Social Charge (USC) if your gross income is over €13,000 a year. An extra charge of 3% applies to any self-employed income over €100,000.

PRSI

If you are self-employed and aged between 16 and 66, you pay Class S PRSI. This is 4% on your gross income less allowable expenses. You must pay 4% of all your income or €500, whichever is greater.

If you earn less than €5,000 from self-employment in a year, you are exempt from PRSI, but you may pay €500 as a voluntary contributor (if you meet the other conditions).

Tax credits

You can claim tax credits as a self-employed person. See our page on paying tax as a self-employed person for more information.

Subcontractors

If you are a self-employed subcontractor working in construction, forestry or meat processing, find detailed information about Relevant Contracts Tax on Revenue's website.

A partnership is when 2 or more people come together to operate a business. All income received by the partnership is shared between the partners.

While the partnership itself does not pay income tax, each partner must pay tax on their share of the profits.

This means each individual partner must file an annual tax return under the self-assessment system.

How do I file a partnership tax return?

On or before 31 October each year:

• Each partnership must complete and submit a Form 1 Firms (pdf) to Revenue (one person in the partnership submits this form)
• Each individual partner must make a self-assessment tax return on Form 11 using Revenue Online Service (ROS).

This then determines how much tax each partner is liable to pay.

You can claim for any business expenses which you have incurred to earn your profits, using the Revenue Online Service (ROS).

You can claim expenses for:

• The purchase of goods for resale
• Employees’ pay
• Rent and bills for your business premises
• Lease payments and running costs for vehicles and machinery
• Interest payments for money borrowed to fund business

The amount you claim for expenses should not include the VAT amount.

Claiming for part of an expense

You can claim a deduction for part of the expense if:

• Your business premises is also your home address
• Your business phone number is also your personal number
• Your work vehicle is also your personal vehicle

Find more information on what expenses you can claim on Revenue's website.

Value Added Tax (VAT) is a tax charged on the sale of goods or services and is usually included in the price of most products and services. The standard rate of VAT applies to most goods and services. However, some goods and services are liable to reduced rates or are exempt from VAT.

You must register for VAT if you meet any of the following:

• Your sales amount is over the VAT threshold
• You get taxable services from outside Ireland
• You trade with businesses in EU member states

You can also choose to register for VAT. For example, if you have set up a business and want to reclaim VAT on your start-up costs.

Penalties

If your business is required to pay VAT, you must charge VAT to customers when selling products or services. If a business fails to charge VAT to customers, it could be liable for penalties of up to €4,000, while Revenue will also charge a daily rate of interest on the unpaid amount.

Revenue can seize goods if you fail to pay VAT on goods received from another EU country. It can also seize goods if a supplier applies a zero rate of tax on goods that are marked for export, but do not leave Ireland.

Find more information on penalties for failure to pay VAT on the Revenue website.

If you hire employees, you must deduct tax from their pay through the Pay As You Earn (PAYE) system. The amount you deduct depends on the amount of income they earn and on their personal circumstances.

Read Revenue’s information on how to calculate your employee’s tax.

Remember to give employees a payslip with every payment of wages. The payslip must include the employee’s gross income and any deductions, including:

• Income Tax
• Pay-Related Social Insurance (PRSI)
• Universal Social Charge (USC)
• Local Property Tax

You can pay these taxes online through Revenue Online Service. You must make the deductions on or before the date you pay your employee. You must also report the pay and deductions to Revenue.

Employer’s PRSI

As an employer, you must pay employer’s PRSI contributions, which are based on your employees’ earnings. The total amount paid for an employee in one pay period is called a ‘PRSI contribution’.

A PRSI contribution is made up of the:

• Employer's share - the amount of PRSI you pay on your employee's pay
• Employee's share - the amount of PRSI an employee pays on their own pay

A Tax Clearance Certificate is confirmation that your tax affairs are correct and up to date.

You need to have a Tax Clearance Certificate to apply for some schemes and licences. You can apply for a Tax Clearance Certificate from Revenue.

Visit our page on Tax Clearance Certificates for more information.

Read Revenue’s Guide to Completing Pay and File Tax Returns (pdf).

You can also watch a video on how to report your self-employment income.

For general queries about tax, you can use MyAccount.

You can also read:

• Step-by-step guide to setting up a business in Ireland
• How to write a business plan
• How to register a business name
• Deciding on the legal structure of your business
• Employing people in your business
• Closing a business