Corporation tax

Mr CJ

Hi,

I was wondering if someone could answer a couple of questions on corp tax

Am I right in saying that you are charged corp tax on profits made by a company? After this tax is paid and if share holders wish to take some of these profits they will have to pay further tax on this as it is an extra income? Therefore corp tax is pretty much a double taxation? Or am I wrong?

The new incentive which has been setup for new companies where they are exempt from corp tax for 1st 3yrs, do they have to apply for this or is it automatic?

I tried finding the answers to the above on revenue but no luck

Thanks

Legend100

You are correct in the first instance the the company pays corporation tax on its profits

As with regards to the shareholders, if they want to extract this profit (im assuming they are not directors and are simply shareholders) they will take a dividend that is also taxable

The key is that it is not a double charge as the corporation tax is a charge on the company but the dividend will incur a charge of income tax to the shareholder. The dividend will be taxed at the shareholder's marginal rate of tax.

The company will be obliged to pay dividend witholding tax on the dividend if the shareholders are tax resident but the shareholders reclaim this in their income tax return. The absolute cost of the dividend for the company is the gross dividend agreed to pay the shareholders, the dividend withholding tax is merely there for adminstration purposes to ensure the tax is paid.

Hope that helps

dbran

Hi

The new exemption is just claimed on the CT1 return. You do not have to apply for it in advance. Make sure that you definately qualify for it though as there are some terms and conditions.

Kind Regards


dbran