Start up Company Exemption

The intention of the relief is straight forward.  In order to encourage economic activity legislation has being introduced to provide relief from certain taxes for new start up companies.  If the corporation tax of the company is less than or equal to €40,000 and the trade is a qualifying trade then the company is exempt from corporation tax in that year. 

Section 486C TCA 1997 operates as follows:

  • The company must be incorporated within the EEA and can only have being in existence from 14th October 2008.
  • The trade must have commenced on or after the 1st January 2009 and before the 31st December 2015.  Relief applies for three years from the date of commencement. 
  • The relief is available for income from a qualifying trade and gains on the sale of trade assets.  The trade CANNOT be a trade that was carried on by another person, an existing trade, an excepted trade (mineral extraction/petroleum companies or a trade that comes within S441 TCA 1997 close company surcharge ( a service company).  
  • The company's total CT must be less than or equal to €40,000.  The relief is linked to employers PRSI paid in the period.  The total tax relief is limited to the maximum of employer's PRSI paid with a max of €5,000 per employee. 
  • Anti avoidance legislation provides that part of the trade cannot be moved to a connected company.  This is to stop group companies lowering the €40,000 corporation tax liability to make a trade qualify. 
  • To quantify the relief available the company must calculate its relevant corporation tax which is its total corporation tax less tax on income at 25%, close company surcharges and tax on chargeable gains. 
  • The legislation requires that amounts which can be set against total profits must be set against income in priority to chargeable gains. 
  • The relevant corporation tax is then applied to the qualifying trade income over the total income.  This will give the amount to be deducted to the CT Charge.
  • The relief for the disposal of qualifying trade assets is operated in the same method as relevant corporation tax.
  • Also marginal relief is available if the total corporation tax is between €40,000 and €60,000.