Corporation Tax in Ireland 2026: Rates, Who Pays It and How Small Companies Are Taxed

Ireland's corporation tax rate gets a lot of international attention, but most of what is written about it is aimed at multinationals, economists and journalists. Very little of it helps the owner of an Irish limited company understand what their own company will actually pay.

This guide is written for that owner. It covers who pays corporation tax, the two rates that apply, how trading and non-trading income are treated differently, what happens to company capital gains, why the 15% Pillar Two rate does not touch small companies, and the reliefs and deadlines that matter in practice. Where a figure is quoted, it comes from Revenue's own Tax and Duty Manuals, which are linked at the end.

If you only need the filing and payment dates, our separate guide to CT1 returns and corporation tax deadlines walks through them with a worked calendar.

What corporation tax is and who pays it

Corporation tax is the tax a company pays on its profits. A company that is tax resident in Ireland is chargeable on all of its profits wherever in the world they arise. Profits for this purpose means the company's income plus its chargeable gains, after allowable losses.

A company that is not resident in Ireland is generally outside the charge unless it trades here through a branch or agency, or it has Irish rental income or gains on Irish rental property. Non-resident landlord companies came within corporation tax under rules introduced by Finance Act 2021.

Residence follows incorporation for most modern companies. A company incorporated in Ireland on or after 1 January 2015 is treated as Irish tax resident unless a double taxation treaty treats it as resident elsewhere. Older companies and foreign-incorporated companies are tested on where their central management and control sits, which looks at where the board meets, where major decisions are taken and where the directors live.

Profits are measured by accounting period. For most companies that is simply the twelve months covered by the annual accounts.

The two rates: 12.5% and 25%

Ireland has two main corporation tax rates, and which one applies depends on the type of income rather than the size of the company.

The 12.5% rate applies to trading income. That is the profit from the business the company was set up to carry on: selling goods, providing services, manufacturing, consulting, software, construction operations and so on.

The 25% rate applies to non-trading income. Revenue's guidance lists what falls in here:

• Rental income from land and buildings in Ireland (Case V income).
• Interest, foreign income and discounts (Case III income).
• Miscellaneous income that does not fit elsewhere (Case IV income).
• Income from working minerals and petroleum activities.
• Profits from dealing in or developing land, other than construction operations.

The distinction catches people out. A trading company that keeps a large cash balance on deposit pays 25% on the deposit interest, not 12.5%, because interest is passive income even when a trading company earns it. A company that buys a property and lets it out pays 25% on the rent. Only in narrow cases, such as regulated firms required to hold capital, does Revenue accept that deposit interest is trading income.

What counts as trading income

Trading is not defined in the legislation, so it takes its ordinary meaning and the case law built up over decades. In practice Revenue looks at whether the company is carrying on real commercial activity with a view to profit: employees or directors doing the work, customers, a turnover of transactions, and risk being taken.

A company that simply holds investments or collects rent is not trading. A company that provides professional services, such as consultancy, is trading, although it may be caught by the close company surcharge rules described below. If there is doubt about whether an activity is a trade, that doubt should be resolved before the first CT1 is filed, because it drives the rate on every euro of profit.

How company capital gains are taxed

When a company sells an asset at a profit, the gain is calculated under capital gains tax principles but is brought into the corporation tax computation. The gain is recalculated so that the corporation tax charged equals what capital gains tax would have been at the CGT rate. The effect is that a company pays the CGT rate on its gains even though the tax is collected as corporation tax.

The CGT rate was 33% for disposals up to 6 October 2026. Budget 2027 reduced it to 31% for disposals from 7 October 2026. Gains on development land are different again and are charged to capital gains tax directly rather than through corporation tax.

A company disposing of shares in a trading subsidiary may qualify for the participation exemption under section 626B, which exempts the gain entirely where the holding and trading conditions are met. That exemption is aimed at holding companies and is outside the scope of this guide.

Pillar Two and the 15% rate: why it does not apply to small companies

The question we are asked most often by company owners is whether Ireland's corporation tax rate is now 15%. For almost every Irish company, the answer is no.

The 15% minimum effective rate comes from the OECD Pillar Two agreement, implemented in Ireland through Part 4A of the Taxes Consolidation Act. It applies only to groups whose consolidated revenue is at least €750 million in at least two of the previous four years. That captures large multinationals and a small number of very large Irish groups. For everyone else, the 12.5% and 25% rates continue to apply exactly as before.

If your company is not part of a group turning over €750 million, you can ignore Pillar Two. There is no registration, no top-up tax return and no change to your CT1.

Start-up relief: three to five years of reduced corporation tax

Section 486C gives new companies relief from corporation tax in their early years. It is one of the most under-claimed reliefs we see on CT1 reviews, mainly because it is linked to PRSI rather than simply to profits.

The main conditions, from Revenue's manual on the relief:

• The company must be new and must start a qualifying trade on or before 31 December 2026. The relief has been extended several times, so if your company starts trading after 2026, check whether the Finance Act has extended it again.
• The relief applies for the first five years of trading where the company's total corporation tax for the year is €40,000 or less. Marginal relief applies where the tax is between €40,000 and €60,000. Above €60,000 there is no relief for that year.
• The amount of relief is capped at the employer PRSI the company paid in the year, up to €5,000 per employee. From accounting periods beginning on or after 1 January 2025, Class S PRSI paid by directors through payroll also counts, up to €1,000 per director. The overall cap is €40,000 a year.
• Unused relief from the first five years can be carried forward.
• A trade previously carried on by someone else does not qualify. That means a sole trader who incorporates an existing business does not get the relief. Professional service companies are also excluded.

The relief is claimed on the CT1. If it was missed in an earlier year, the return can usually be amended within the four-year time limit.

Losses: what a company can do with a bad year

A trading loss is not wasted. Revenue's general corporation tax manual sets out the options:

1. Set the loss against other trading income of the same accounting period.
2. Carry the loss back against trading income of the immediately preceding accounting period of the same length.
3. Use any excess on a value basis against corporation tax on other profits, including the 25% income and chargeable gains. A 12.5% trading loss reduces tax by 12.5% of the loss, so a €100,000 trading loss relieves €12,500 of tax on other profits.
4. Carry the remaining loss forward against future profits of the same trade, without time limit.
5. In a group, surrender the loss to another group company where there is at least 75% common ownership.

Claims for loss relief, other than terminal loss relief, must be made within two years of the end of the accounting period in which the loss arose. Rental losses are ring-fenced to rental income and non-trading losses to the same category of income.

Deductions and capital allowances

The starting point for the tax computation is the accounting profit, adjusted for items the tax code treats differently. Expenses are deductible where they are revenue in nature and incurred wholly and exclusively for the trade. Business entertainment is specifically disallowed. Depreciation is added back because it is a capital item, and capital allowances are given instead.

The most common capital allowance is the wear and tear allowance on plant and machinery, which is given at 12.5% a year over eight years. New energy-efficient equipment on the SEAI's published list qualifies for a 100% allowance in the year it is first used, under a scheme that runs until 31 December 2030. Motor vehicles have their own rules, which we cover in our guide to company cars. Pre-trading expenses incurred in the three years before the trade started are allowed as a deduction once trading begins.

Companies doing qualifying research and development may also claim the R&D tax credit, which is a credit against corporation tax rather than a deduction and is worth considerably more.

The close company rules

Most Irish owner-managed companies are close companies, meaning they are controlled by five or fewer people or by their directors. Close companies face two extra charges that are easy to miss: a surcharge on undistributed rental and investment income, and a charge where the company lends money to a shareholder. Both are explained in our guides to the close company surcharge and to paying yourself from a limited company.

Deadlines in brief

Every company has three dates to manage: preliminary tax, the CT1 filing date, and the balance payment date. For a company with a 31 December year end that files through ROS, preliminary tax is due on 23 November of the year itself and the CT1 and balance are due on 23 September of the following year. New companies with a liability under €200,000 do not pay preliminary tax for their first period. Our deadlines guide covers the rules for small and large companies and what late filing costs. The dates for every month end are also on our tax calendar.

Is Ireland a tax haven?

The short answer is no. Ireland's 12.5% rate is low by European standards but it is a real rate applied to real profits, and it has been the headline rate since 2003. The arrangements that earned Ireland the tax-haven label in the past, such as the double Irish structure, were closed off between 2015 and 2020. Since 2024 the largest groups have paid a minimum effective 15% under Pillar Two. For a domestic small company, the regime is straightforward: 12.5% on trading profit, 25% on passive income, and a set of reliefs that reward employment and investment.

Getting help with your CT1 and corporation tax

We prepare and file CT1 returns for Irish companies, calculate preliminary tax so there is no interest exposure, and review prior years for missed reliefs such as start-up relief and the R&D credit. Contact us today if you need help with CT filings, or get in touch here and we will get back to you.

Sources

The figures in this guide are taken from the following Revenue publications: Tax and Duty Manual Part 02-02-01, Corporation Tax: General Background; Part 15-03-03, Tax Relief for New Start-up Companies; Part 41A-07-02, Payment of Preliminary Corporation Tax; and the Notes for Guidance on Part 4A TCA 1997 (Pillar Two). Information provided courtesy of the Revenue Commissioners under a Creative Commons Attribution 4.0 International (CC BY 4.0) licence. Revenue's overview page on corporation tax for companies is also a useful starting point.