• Direct taxes are taxes on income (e.g. corporation tax). • Indirect taxes are taxes on expenditure (e.g. VAT).
Direct Taxes in Ireland
Income Tax
Income tax (PAYE) is deducted as a percentage of income. There are two main rates: the standard rate and the higher rate. The more a person earns, the more income tax they pay.
Employees are allowed to earn up to a set amount, called the standard rate cut-off point, and are taxed on this at the standard rate. Any income over the standard rate cut-off point is taxed at a higher rate.
Pay Related Social Insurance (PRSI)
PRSI is divided into eleven different classes. The class a person pays from their income determines the social welfare payments they are eligible for. Employers are also obliged to pay PRSI for each employee. Universal Social Charge (USC)
USC was introduced by the government in 2011. It is paid by all employees with a gross income over a certain figure (approximately €12,000). Corporation Tax
Corporation tax is paid by companies on their profits. The current rate of corporation tax in Ireland is 12.5%, which is low compared to some other EU countries (e.g. France’s corporation tax rate is approximately 33%).
Low corporation tax is a great benefit to the Irish economy as it plays a large part in attracting foreign multinationals to set up in Ireland.
Deposit Interest Retention Tax (DIRT)
Deposit Interest Retention Tax (DIRT) is charged on interest earned on money in a deposit account. It is collected by deposit takers (e.g. banks).
