21 The charge to corporation tax and exclusion of income tax and capital gains tax

Summary

Corporation tax is charged on the profits of companies for a financial year.

The standard rate of corporation tax is —

• 20 per cent for the financial year 2001,
• 16 per cent for the financial year 2002,
• 12½ per cent for the financial year 2003 onwards.

However, it is to be noted that section 21A provides that a 25 per cent rate of corporation tax is charged for the financial year 2000 onwards on certain profits of companies. Under Part 14, before 1 January 2011, certain income of companies consisting of income from the sale of goods (manufacturing income) was charged at an effective rate of 10 per cent. Also, section 644B provides for an effective 20 per cent rate of corporation tax on income from dealing in residential development land.

In general, a company within the charge to corporation tax in respect of a given source of income is not within the charge to income tax in respect of that same income. Also, where a company is within the charge to corporation tax in respect of a gain on a disposal there will not be a charge to capital gains tax in respect of that gain.

Details

Charge to corporation tax

(1) Corporation tax is charged on the profits of companies for a financial year.

The rate of tax is —

• 32 per cent for the financial year 1998,
• 28 per cent for the financial year 1999,
• 24 per cent for the financial year 2000,
• 20 per cent for the financial year 2001,
• 16 per cent for the financial year 2002, and
• 12½ per cent for the financial year 2003 and each subsequent year.

Shipping activities

(1A) Profits from qualifying shipping activities arising to a company carrying on a qualifying shipping trade (see notes to section 407 for explanations of these terms) are taxable at the rate of 12.5 per cent in the financial years 2001 and 2002. Likewise, tonnage tax profits are taxable in 2002 at the rate of 12.5 per cent (see notes to Part 24A).

Exclusion of income tax

(2) Income tax is not chargeable on the income of a company (apart from income arising to it in a fiduciary or representative capacity) if —

• the company is resident in the State, or
• the income is, where it arises to a non-resident company, chargeable to corporation tax.

A company’s obligation under section 24 to deduct income tax from charges and to account for that tax to the Revenue is not affected by this provision.

[In the case of a non-resident company, corporation tax is charged by virtue of section 25 on the income and chargeable gains of the company where the income or gains are attributable to a branch or agency in the State. Any other income arising in the State and any other chargeable gains accruing to a non-resident company are chargeable to income tax or capital gains tax, as the case may be, instead of corporation tax.]

Exclusion of capital gains tax

(3) A company is not chargeable to capital gains tax on any gains accruing to it but is instead chargeable to corporation tax in respect of such gains. However, by virtue of section 649, development land gains accruing to a company are chargeable to capital gains tax and not corporation tax.

Relevant Date: Finance Act 2019