Ireland Fact-File Part 2:
Individual Business Domestic Taxation

2.4 Ireland Personal Allowances and Business Deductions

Allowances and deductions for individuals in business

Individuals in business can normally claim a standard range of expense deductions against their business income. Although capital expenditure – usually defined as costs involved in the purchase, alteration, installation, or improvement of fixed assets used by the business; depreciation relating to a capital asset (land, buildings, interests in land, such as leases, plant, and machinery); and losses which stem from the sale of a capital asset, as defined above – is not generally deductible for corporate tax purposes in Ireland, a small business can claim capital allowances (which take into account the ‘wear and tear' on such items) on certain business plant and machinery, office equipment, vehicles (subject to a maximum qualifying cost), and some types of industrial building.

These allowances are calculated on a straight-line basis (meaning that the capital allowance is the same each year until the expenditure has been entirely accounted for), at a percentage of the cost, net of any grants, and discounting VAT. For plant, machinery, and motor vehicles, this rate has been 12.5% since December 2002. For qualifying industrial buildings, the rate is 4%.

Updated in December 2010 Tax credits are available to individual tax residents in Ireland at EUR1,650 in 2011 (down from EUR1,830 previously) for single/widowed taxpayers, and EUR3,300 (down from EUR3,660) for married couples. Various other credits are available, again, usually just for tax residents (for example a EUR1,650 - previously EUR1,830 - employee credit), and are set off against the total tax liability for the year.

With regard to the tax treatment of property purchases, tax relief (which does not need to be claimed, but is ‘built into' the mortgage repayments) is granted at 25% for the first two years, 22.5% for the following three, and 20% for the final two years that the relief is available, subject to the following overall annual limits :

In terms of the tax treatment of property rental, tax relief may be available on the rent paid, at the standard rate for individuals (20%), subject to reducing maximum limits (as the credit is being abolished, and is set to be phased out completely by 2018)..

The form for claiming this relief is the ‘Rent 1 - Claim for Rent Relief for Private Rented Accommodation' form.

With regard to the treatment of educational expenses for taxation purposes, tax relief is available at the standard rate (20%) on third level education costs relating to approved courses, undertaken at approved institutions. Third level education comprises courses at various levels undertaken at any of the Republic's universities, technological institutes, or colleges of education.

Until 2006, in order to claim said relief, the taxpayer was required to be either be claiming on their own behalf, or on behalf of a spouse, child, or legal ward. However, this requirement was removed in 2007, and the relief can now be claimed by any individual, as long as he or she has paid the fees in question.

Introductory Guides

Brief, clearly written summaries with links to relevant sections of the Fact-File. The Fact-File itself is linked in full below.

Ireland Artist Tax Guide

Ireland Contractor Tax Guide

Ireland Entrepreneur Tax Guide

Ireland Professional Tax Guide

Ireland Small Business Tax Guide

Ireland Sportsperson / Entertainer Tax Guide

Fact-File

Part 1: Business Formation for Individuals

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