Finance Act (No 2) 2008 included an exemption for new companies which were incorporated after 14 October 2008 and start trading in 2009. It is an exemption from corporation tax on profits arising from a company’s trading activities and chargeable gains on the disposal of trade-related assets. It will apply for each of the first three years that the trade is carried on, provided that the company’s taxable profits for the year do not exceed €320,000. Marginal relief is available for companies with taxable profits of between €320,000 and €480,000. No relief applies where the taxable profits amount to €480,000 or more.
Companies carrying on trades which are subject to corporation tax at 25% (e.g. certain land dealing and exploration-related trades) and companies whose trade consists of the provision of certain professional services are excluded. This means that the relief will be available to companies that carry out manufacturing or distribution activities and companies that provide non-professional services such as book-keeping, secretarial, operation of a retail pharmacist, advertising, marketing and promotional services. It will not be available to companies that provide consulting (legal, medical or financial) services.
Anti-avoidance provisions have been introduced to exclude new companies which take over existing trades or transfer trades between connected companies. In addition, to comply with the EU regulation, a special rule is to apply to the transport of passengers and goods.
The section is subject to ministerial order as it must meet the requirements of the EU de minimis aid regulation which imposes a ceiling for State-aid. At this stage, the legislation appears to only apply to trades that start in 2009 and does not appear to apply to trades set up and commenced in future years.
Contact mariebarr@barrpomeroy.ie with any queries.