Ireland's 12.5% corporation tax rate on trading income is a cornerstone of its appeal to founders and multinationals alike. But the headline rate is only part of the picture: understanding the difference between trading and passive income, the CT1 filing process, preliminary tax and available reliefs can materially reduce your bill and keep you compliant.
Irish corporation tax rates
Ireland applies different corporation tax rates depending on the nature of the income. Trading income benefits from the well-known low rate, while passive (non-trading) income is taxed at a higher rate.
| Type of income | Rate |
|---|---|
| Trading income | 12.5% |
| Passive / non-trading income (e.g. rental, investment) | 25% |
| Certain capital gains | Taxed under capital gains rules |
The CT1 return and payment deadlines
Companies file an annual Corporation Tax return, the CT1, through Revenue's ROS system. Alongside the return, companies must pay preliminary tax — an advance payment towards the current year's liability.
- The CT1 is generally due within nine months of the company's financial year end (by the 23rd of that month when filing and paying via ROS).
- Preliminary tax must be paid before the year end based on expected profits.
- Small companies have simplified preliminary tax rules based on the prior year's liability.
Key reliefs that reduce your bill
Start-up company relief (Section 486C)
New trading companies may qualify for relief from corporation tax in their early years, linked to the employer's PRSI paid on employees. This can significantly reduce or eliminate corporation tax for qualifying startups.
Research & Development (R&D) tax credit
Companies carrying out qualifying R&D activities in Ireland can claim a valuable tax credit against corporation tax, and in some cases receive a cash refund. This is one of the most under-claimed reliefs by Irish SMEs.
Knowledge Development Box
Income from certain qualifying intellectual property developed in Ireland can benefit from an effective reduced rate, rewarding genuine innovation carried out in the country.
Staying compliant
- Maintain accurate books that clearly separate trading and passive income.
- Pay preliminary tax on time to avoid interest.
- File the CT1 within nine months of year end.
- Keep documentation to support any reliefs claimed, especially R&D.
- Review your structure annually as profits grow.
Common mistakes to avoid
The pitfalls we see businesses run into most often on this topic.
- Assuming all income is taxed at 12.5% — passive income is taxed at 25%.
- Underpaying preliminary tax and incurring interest charges.
- Missing the startup relief because employer PRSI and eligibility weren't tracked.
- Failing to claim the R&D tax credit due to poor documentation.
- Treating the CT1 as optional in a loss-making year — it must still be filed.
Frequently asked questions
How Stratancy can help
Stratancy prepares and files your CT1, calculates preliminary tax, and proactively identifies reliefs — from start-up relief to the R&D tax credit — so you never pay more than you should. Our ACCA-qualified team structures your accounts to clearly separate trading and passive income, keeps the documentation needed to support claims, and reviews your position as you grow. Corporation tax becomes a planned, optimised part of your year rather than a year-end surprise.