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Tax Exemption for Start Up Companies

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Information leaflet on how to avail of the Tax Exemption for Start Up Companies.

Published in: Business
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Tax Exemption for Start Up Companies

  1. 1. Finance (No.2) Act 2008 – Tax Exemption for New Start Up Companies Sec 32 of the Finance (No.2) Act 2008 provides for a new relief from corporation tax for companies, which commence trading in 2009. The exemption is granted in respect of the profits of a new trade and chargeable gains on the disposal of any assets used for the purposes of a new trade. Main Provisions: • A “new company” is a company incorporated in the State or in an EEA State on or after 14 October 2008 and commences a new trade in 2009. • The exemption is applicable to all companies that satisfy the conditions of a “qualifying trade” • A “qualifying trade” means a trade which is set up and commenced by a new company in 2009 other than a trade- (i) which was previously carried on by another person and to which the company has succeeded; (ii) the activities of which were previously carried on as part of another person’s trade or profession; (iii) which is an excepted trade; or (iv) the activities of which if carried on by a close company with no other source of income, would result in that company being a service company for the purposes of section 441. Where a trade consists partly of excepted operations and partly of other operations or activities, then section 21A(2) shall apply for the purposes of this section as it applies for the purposes of section 21A. • An ‘excepted trade’ means a trade consisting only of trading operations or activities, which are excepted operations, or, in the case of a trade consisting partly of excepted operations and partly of other operations or activities, the part of the trade consisting only of excepted operations which is treated as a separate trade by virtue of subsection (2). • In this section, "service company" means, subject to subsection (2)— ( a ) a close company whose business consists of or includes the carrying
  2. 2. on of a profession or the provision of professional services, ( b ) a close company having or exercising an office or employment, or ( c ) a close company whose business consists of or includes the provision of services or facilities of whatever nature. • The tax authorities regard the following as being professions, and therefore not qualifying for the new exemption: Accountant, actor, actuary, archaeologist, architect, auctioneer/estate agent, barrister, computer programmer, dentist, doctor, engineer, journalist, management consultant, optician, private school, quantity surveyor, solicitor, veterinary surgeon. This list is not exhaustive. Another example of the subjectivity of this relief is that accountancy comes within the meaning of profession, while book-keeping, payroll and VAT compliance activities, would not in themselves constitute a professional activity. The following activities are considered by Revenue as not constituting the carrying on of a profession: • Advertising agents, auctioneers of livestock in a cattle mart, insurance brokers, the operation of a retail pharmacy, public relations companies and stock brokers. • The exemption is granted by reducing the total corporation tax (including the tax referable to Capital Gains) relating to the trade to nil. Full relief is granted where the total amount of corporation tax payable by a company for an accounting period does not exceed €40,000. Marginal relief is granted where the total amount of corporation tax payable by a new company for an accounting period amounts to between €40,000 and €60,000. No relief applies where corporation tax payable is €60,000 or more. Relief shall apply to companies whose activities consist of wholly or mainly of the conveyance by road of persons or goods or the haulage by road of other vehicles, shall not exceed €100,000. • Where a person transfers a trade to another company, that part of the trade carried on by the new company, shall be treated as a separate trade.
  3. 3. • Where in an accounting period a company transfers to a connected person part of a qualifying trade, then the company shall not be entitled to relief under this section in respect of that trade for that or any subsequent accounting periods. Before a company is set up and commences trading with the intention to avail of the tax exemption, tax advice should be obtained to ensure that the trade, being commenced, satisfies the requirements in the Finance Bill. If you have any queries or want OmniPro to form your company, please contact Conor Sweeney or Amy Brennan 059 9183888 or formations@omnipro.ie U

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