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Corporation Tax Exemption

The exemption will apply to new companies who have a taxable profit of approximately €300,000.

The Minister for Finance finally signed the commencement order for the tax exemption for new start up companies on 15th December 2009.

The exemption, first announced by the Minister in the Budget in October 2008, applies to companies incorporated on or after 14th October 2008 and who commence a new trade in 2009.

Section 31 of Finance (No.2) Act, 2008 provides that a three year exemption will apply to these companies who have a tax liability of less than €40,000 per year by reducing this liability back to nil. Marginal relief will apply where the tax liability is between €40,000 and €60,000 and but no relief will apply once the liability exceeds €60k. In short, the exemption will apply to companies who have a taxable profit of approximately €300,000.

There is some good news for companies that have commenced a new trade in 2010. The Department of Finance has confirmed that it will extend the exemption to companies that commence a new trade in 2010. This amendment will be contained in the Finance Bill which is due to be published on 4th February 2010.

Any company intending to avail of the tax exemption should review Sec 32 of Finance (No.2) Act, 2008 in detail as there are a number of conditions to be satisfied before successfully claiming the exemption. These include:-

  • The company must be incorporated on or after 14th October 2008
  • The company must commence a “new trade” in 2009 (to be extended to 2010)
  • A “new trade” cannot be previously carried on by another individual or company
  • Trade will not include professions, providing professional services, exercising an employment, or the provision of services to a business entity carrying on a profession or exercising an employment.

If you have any queries, please contact Denis Breen