No corporation tax on new company - excluding 'professional services'

TTI

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Hi,

I have a query about the no corporation tax for new companies.

Irish Tax Exemption for Start Up Companies
The exemption from corporation tax and capital gains tax for certain trading start up companies in 2009, has been extended to new start ups companies which commence trading in 2010. The exemption applies for three years and is subject to certain anti-avoidance provisions.

Specifically:

The tax relief does not apply to professional service companies

Where can I find a definition of this? I am a degree qualified engineer who would be designing software and hardware systems for different clients.
 
[broken link removed]
As the tax acts do not define “profession” it must be given its ordinary meaning in accordance with the general principles of statutory construction. In the tax case of CIR V Maxse, 12 TC 41, it is stated that profession involves an occupation requiring either intellectual skill, as in painting, sculpture or surgery or skill controlled by the intellectual ability of the operator. It distinguishes this from an operation, which is substantially the production or sale of commodities.
While certain activities clearly fall within this definition and are accepted as being the exercise of a profession, such as medicine or law, there may be questions about the status of others. Each case should be examined with regard to its own particular facts and the question of degree is important.
However the following are regarded as being professions and as falling within the provisions of Section 441:
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.

While the above are considered to be providing professional services, the list is not intended to be an exhaustive list of all possible professions.
 
Ok, is there a difference between working as a consultant from my company and selling a software product for the purposes of this corporation tax exemption? Reading the above suggests that the corporation tax exemptions for the first three years do not apply.
 
On the face of it the consultancy aspect and software selling would be treated differently as the former would be professional services where the other would not.
Some other aspects of this exemption i.e. the way it is linked to Employers PRSI for instance, have made it quite a limited exemption in practice.
Numbercruncher
 
Thanks for your reply, is there a way to segregate both activities within the same company for the purposes of the corporation tax calculation?
 
OP, what were you doing prior to setting up the company? Were you self employed, or working on payroll somewhere?
 
Hi

A professional services company is one where the principle part of the company's income is derived from professional services. So provided the principle part of the income does not derive from the type of services posted by Mandelbrot above it will not be a professional services company.

However the whole thing is really geared towards Foreign Direct Investors. As it is linked to the employers prsi which means you have to take on staff. There is also the issue of how you get the money out of the company in the end which will still attract tax.

For small owner managed companies corporation tax is not usually a significant amount anyway.

capnhand
 
Hope it's ok to post a follow up question here, instead of a new thread...

I'm in a similar position to the OP.
As a one-man company, I'm not eligable for CT exemption, as there is no employer PRSI.

At the year end, if there is a profit, is it allowable/sensible to just pay it out to myself as salary, and pay the PAYE as usual; then in the new year return the money to the company as a director's loan?
 
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