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 guidance or the Department of Finance's Finance (No. 2) Bill 2026 publications, all 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. A company incorporated in Ireland is treated as Irish tax resident unless a double taxation treaty treats it as resident elsewhere. That rule has applied from the start to companies incorporated on or after 1 January 2015, and to older Irish companies since 1 January 2021, when a transition period ended. A company incorporated abroad is Irish resident if its central management and control is exercised here, 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. Revenue accepts deposit interest as trading income only in two narrow cases: where a regulator requires the company to hold a set level of capital, and where deposits are integral to the trade, as with banks and insurers.

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 engineering or architecture, 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, and stay at 33%.

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's 15% rate applies only to very large groups

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 (Section 486C): up to five years of reduced corporation tax

Section 486C reduces, and can eliminate, corporation tax for a new company in its first five years of trading. It is easy to miss, mainly because the amount of relief depends on the PRSI the company pays rather than simply on its profits.

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

• The company must be incorporated in Ireland, the EU/EEA or the UK on or after 14 October 2008, and must start a new qualifying trade on or before 31 December 2026. The Finance (No. 2) Bill 2026, published on 19 October 2026, extends this to trades started by 31 December 2030. The Bill is not yet law. A company formed some years ago that is only now starting to trade can still qualify.
• Relief runs for five years from the day the trade starts. Full relief is available in any year where the company's total corporation tax, on all its income and gains, is €40,000 or less. Marginal relief applies between €40,000 and €60,000, and at €60,000 or more there is no relief for that year. These limits are reduced proportionately for an accounting period shorter than 12 months, which is common in a company's first year.
• The relief can never exceed the PRSI the company pays. It is capped at the employer PRSI paid in the year, up to €5,000 for each employee or director. For accounting periods beginning on or after 1 January 2025, Class S PRSI deducted through payroll from a director's salary also counts, up to €1,000 per director. The overall cap is €40,000 a year.
• The relief only reduces corporation tax on the profits of the new trade and on gains on its trading assets. It does not shelter the 25% tax on rent, deposit interest or other passive income.
• Relief that cannot be used in the first five years, because of losses or low profits, is carried forward to later years. In each later year it is still capped at the PRSI paid in that year, so it only helps if the company is still paying employer PRSI or director Class S PRSI.
• Some trades do not qualify. A trade previously carried on by someone else is excluded, so a sole trader who incorporates an existing business does not get the relief (see our guide to sole trader vs limited company). Also excluded are professional services and services provided to professionals, dealing in or developing land, mining and petroleum activities, certain farming, fishing and aquaculture activities, and activities that would form part of an existing trade of an associated company. Road transport and haulage companies are limited to €100,000 of relief in total.

The relief is claimed on the CT1. If it was missed, the return can be amended to claim it within four years of the end of the accounting period, provided Revenue has not already opened an enquiry or audit into that return.

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. Cars are treated differently: capital allowances on a company car are restricted by reference to its CO2 emissions. The tax the driver pays on a company car is covered 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 on top of the normal deduction for the spend, so it is worth considerably more than the deduction alone.

The close company rules

Most Irish owner-managed companies are close companies, meaning they are controlled by five or fewer participators, or by participators who are directors. Close companies face three extra charges that are easy to miss: a surcharge on undistributed rental and investment income, a further surcharge on undistributed income of professional service companies, and a charge where the company lends money to a shareholder. The surcharges are explained in our guide to the close company surcharge and the loan charge in our guide 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 (large companies also pay a first instalment on 23 June) 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. The Finance (No. 2) Bill 2026 raises both this limit and the small company threshold to €350,000 for accounting periods beginning on or after 1 January 2027, once enacted.

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 been subject to a minimum effective rate of 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 to keep the company clear of interest charges, 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 these Revenue publications:

• Tax and Duty Manual Part 02-02-01, Corporation Tax: General Background
• Tax and Duty Manual Part 02-02-03, Company Residence in the State
• Tax and Duty Manual Part 02-03-01A, Capital Gains Tax Rate of Charge and Revenue eBrief No. 142/26
• Tax and Duty Manual Part 04A-01-02, Global Minimum Level of Taxation (Pillar Two)
• Tax and Duty Manual Part 09-02-04, Accelerated Capital Allowances for Energy-Efficient Equipment
• Tax and Duty Manual Part 13-02-06, Surcharge on Undistributed Income of Service Companies
• Tax and Duty Manual Part 15-03-03, Tax Relief for New Start-up Companies
• Tax and Duty Manual Part 29-02-03, Research and Development Corporation Tax Credit
• Tax and Duty Manual Part 41A-07-02, Payment of Preliminary Corporation Tax
• 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. The 2027 changes to start-up relief and preliminary tax are from the Department of Finance's Explanatory Memorandum to the Finance (No. 2) Bill 2026. Revenue's overview page on corporation tax for companies is also a useful starting point.