Accounting Question

stocktrader

Based in Ireland. VAT rate is 23% and Income tax circa 33%.

Say a company makes 123000 euro in a year.

23000 goes to VAT
10000 goes to expenses
10000 goes to a pension for an employee
25000 goes as a net salary for an employee
8000 on taxes of this salary

this leaves net profit of 55000 for the company.

so the question is.... where does the 8000 taxes for the employees salary come from and how can the company have 55000 sitting in the company account if it had to pay out 8000 in taxes?

Alan Shore

Turnover 100,000
Less expenses 10,000
Pension 10,000
Wages 33,000
Net profit 47,000

The payroll taxes are paid out of the gross salary.

stocktrader

Alan Shore wrote: »

Turnover 100,000
Less expenses 10,000
Pension 10,000
Wages 33,000
Net profit 47,000

The payroll taxes are paid out of the gross salary.

I'm presuming the wages there of 33,000 is the net amount?

so how does the company pay the taxes then? it would need say 108.000?

smcgiff

The company has gross wages, it then has Employer's PRSI to calculate.

It pays the net amount of wages (gross less paye/ee PRSI, USC) to its various employees.

It then pays the Employees PAYE, PRSI and USC + employer's PRSI direct to the Revenue. The employees' PAYE, PRSI and USC is paid on behalf of the employees to discharge their tax obligation. The employer's PRSI is paid to discharge the employer's tax obligation.