Taxation of Sole Proprietorships in Ireland

Foreign entities interested to open a company in Ireland should know that all business forms operating here are required to register for taxation purposes. This is also applicable to sole proprietorships, which are taxed on a different taxation scheme than the one applicable to other business forms, as there is no legal difference between the sole trader and the company’s founder. Our team of specialists in company formation in Ireland can advise on the main taxes imposed to an Irish sole trader.

Taxes for Irish sole traders

One of the taxes the sole proprietorships are liable to in Ireland is the income tax. The income tax for this busines form is imposed at the rate of 20% at the level of 2018, for an income up to EUR 34,550. The rate increases to 40% for an income above this sum. When starting the procedure of company registration in Ireland for a sole trader, the company’s founder is required to apply for this tax starting with the day when the business will begin its operations, as prescribed by the Tax Consolidation Act 1997. 

At the same time, a sole trader is liable to register with the Pay As You Earn (PAYE) system. Its taxation scheme depends upon the employment contract of the employee (which, in this case, can refer to the company’s founder – who has to register as a self-employed person, or to other employees the sole trader may have). In the case of a full time employment contract, the PAYE is established at EUR 8 per week. Our team of agents in Ireland company formation can offer assistance on the registration procedure for the PAYE system. 

VAT for sole proprietorships in Ireland 

According to the VAT Consolidation Act 2010, the Irish sole trader can also be liable to paying the value added tax (VAT). The VAT rate applicable to a sole trader can differ depending on the company’s turnover and its business activities. It is compulsory to register for VAT if the company’s yearly turnover is above EUR 75,000 for the supply of goods, while for the supply of services, the registration is imposed when the turnover is above EUR 37,500. If the turnover is below these values, the company does not have to register for VAT purposes. 

The legislation on the field also prescribes compulsory VAT registrations for other types of activities, provided that a specific threshold is achieved during a financial year. Investors can contact our team of specialists in Ireland company formation for consultancy services related to the VAT registration, as well as on other taxes applicable to an Irish sole trader.