Corporation Tax Exemption for StartUps – Updated

Did you know that your new company can be exempt from Corporation Tax for up to three years?

Back in 2010, the Government introduced a Corporation Tax exemption for new start-up companies.  This allowed companies to earn annual profits of up to €320,000 per year for 3 years, with no liability to Corporation Tax.

The relief has since been capped at the amount of employers’ PRSI paid by the company in a given year.

This applies subject to a maximum of €5,000 per employee and an overall limit of €40,000.

On the other hand, companies who fail to use up their exemption in their first three years are now allowed to carry forward unused relief to future years.

In calculating the capped amount, credit is given for any employers’ PRSI exempted by the Employer Job (PRSI) Incentive Scheme.

This means that the exemption is now only worthwhile to companies who employ staff (excluding directors) within the first 3 years of operation.

However, it can still be useful even if your company doesn’t make profits until year 4, or later.

If you have a new or recent startup company, it is well worth doing the sums to see if you can benefit by hiring a new staff member.

The relief currently applies only to companies that start trading before the end of 2014, so if you’re planning a startup, don’t delay.

As always, professional advice is recommended before making any major decisions.

My previous blog post explains how the exemption initially worked. See also the Revenue 2011 Tax Briefing and 2013 Tax Briefing updates, each with worked examples.