The tax system in Ireland, unlike in other countries, is quite simple. You can understand it and pre-calculate your taxes yourself. We provide a detailed information in this article.
Income tax
You probably heard that if you earned up to 40,000 euros in a year, you will pay 20% of this tax. If you earned more than 40,000 euros, you will pay 40%. This is quite conditional and not entirely correct. Because there are still certain nuances. For example, if you have the following statuses, your income may be:
Single – 42,000 euros
Single parents – 46,000 euros
Married (one works) – 51,000 euros
Married (two jobs) – 84,000 euros
You also have the right to a preferential tax credit (Tax credit). On average, it is 3750 euros per year. This means that the amount of your annual tax will be reduced by the amount of Tax credit.
PRSI is social security tax
Private entrepreneurs pay Class S (there are different classes). It is 4%.
USC is a universal social tax
If your income is less than 13,000 euros per year, you are exempt from paying this tax.
If above 13 thousand:
The first €12,012,000 is taxed at 0.5%, then depending on income it will be 2.0%, 4.0%, 8.0%, if you earn more than €100,000 — 11% USC.
Is it possible to reduce the tax?
To do this, you need to put as much as possible in the “Expenses” basket, that is, you can write off rent, utilities, consumables, expenses for an accountant, professional development courses, business trips (hotel, tickets, etc.).
Example
Single person.
Step 1.
Your income for the year was 40 thousand euros. You wrote off 10,000 euros in expenses for the year. Then, you will calculate taxes from 30 thousand euros. (40-10= 30). Your income, 30 thousand euros, is multiplied by 20% tax income = 6,000 thousand euros. You have 3,750 euros of tax credit. 6000-3750 = 2,250 euros.
Step 2.
PRSI. 30,000 (your income) multiplied by 4% = 1200 euros. This is a contribution to your future pension.
Step 3.
USC. 30,000 = 504.62 euros of this tax.
Result: Your personal tax for the year will be 3954.62 euros.
Inna Yakimenko