Listed below are some tax-deductible expenses for companies and sole traders in Ireland. The definition of a small/medium-sized business is that it has fewer than 250 employees and a group turnover and assets of less than EUR50 million. These deductions are not exhaustive. You should seek detailed, appropriate advice prior to a transaction. This article has been prepared with the intention of providing general guidance only.
Tax-deductible expenses
A company’s operating expenses are deductible, as are the professional fees and advertising costs incurred exclusively for the trade. Operating expenses include salaries and rent, insurance, office supplies, and the costs of payroll. Interest paid on borrowed funds also qualifies for a tax deduction if the loan was taken for the trade. Bad debts, or those relating to specific trading debts, can also be deductible.
Whether or not the expenses are deductible depends on the purpose of the expenditure. A hotel bill for a business trip should include reasonable amounts for overnight accommodation and meals. If the trip is for personal purposes, the private element of the overnight stay does not apply. However, flights are not deductible for sole traders. Unless the trip is required for business purposes, the deductible portion of these expenses should be included in the total.
Other taxable expenses include legal and accounting fees. These fees can be deductible if they relate to the current year. For more details, check Interpretation Bulletin IT-341. Interest expenses for property used for business purposes can also be claimed. In addition, expenses incurred on property that you use for business purposes are deductible. These expenses may also include GST/HST and input tax credits. There are many examples of deductible expenses that businesses and sole traders can claim.
Employee benefits may not be deductible because they have been abused in the past. However, a business may be able to claim a small benefit exemption. This means that an employee can receive a tax fee voucher once a year. The employee benefit vouchers can be claimed as allowable expenses. Other expenses that are deductible include exclusive broadband/mobile lines. The expense must be related to business.
Travel and entertainment expenses for employees are also deductible. Employees can claim expenses for travel and meals that they incur while working for their employers. While a new suit cannot be claimed as a tax-deductible expense, the cost of accommodation is. The business motor vehicle used for business purposes is also deductible. If your business has a permanent address, you can claim accommodation and entertainment expenses as a business expense.
There are rules to claim a capital allowance on certain expenses. For instance, John can claim 20% of his medical expenses in 2016 if he uses his local pharmacy and pays for the services. John can also claim EUR1,500 for his home office furniture. These expenses are deemed to have an average useful life of 8 years, so they can be claimed as a capital allowance. It is important to remember that if you use the home office for personal use, it must not have an impact on the rest of the property.
For sole traders and companies in Ireland, there are a range of expenses you can claim to lower your business tax bill. Renting an office or dedicated room is a legitimate expense and will depend on how much space is required. Likewise, rent will be based on the square meter of the room. You will have to document all your business expenses carefully and follow the rules of the revenue. You should always hire an accountant to help you navigate this complicated tax system.
Allowable deductions
There are various types of allowable deductions for companies and sole traders in the Irish tax system. These can be taken for certain business expenses. For instance, companies can deduct the rent paid on a dedicated room for working purposes. Rent for this room is calculated on a square meter basis. However, this deduction is not available for other expenses. Therefore, companies should carefully plan their deductions to minimise their tax burden.
Some types of hybrid financial instruments are not taxed in Ireland. They are treated as equity and debt in another jurisdiction. As a result, hybrid entities are generally considered opaque in one jurisdiction and transparent in another. Companies could take advantage of tax system arbitrage and qualify for tax relief in more than one jurisdiction on the same payment. However, these new rules will deny any deductions for these hybrid instruments, which are subject to tax in Ireland.
For home-based businesses, home office owners can claim a percentage of their utilities, such as electricity bills. In addition to that, they can claim a flat rate for other costs, including telephone and internet bills. Home business owners can also claim for a percentage of repairs to equipment and business premises. For smaller repairs, it is acceptable to claim a flat rate. Further, if you are a sole trader, you can also claim for a percentage of the larger repair.
Reverse hybrid mismatch
Reverse hybrid mismatches are situations where one entity is treated as tax-transparent in its home jurisdiction while the owner or owners of the other entity treat the company as a separate taxable person. As a result, the entity goes untaxed in the home jurisdiction while the owners are taxed in Ireland. Under Irish law, a reverse hybrid mismatch must be resolved before a company can deduct a tax-deductible expense.
This type of entity is often structured with hybrid financial instruments, such as debt and equity, which means it receives one treatment while being treated as the other. Hybrid entities are typically viewed as opaque in one jurisdiction and transparent in another. The tax system arbitrage allowed companies to receive tax relief in more than one jurisdiction for the same payment. The new rules will disallow this type of tax deduction and make the payments taxable in Ireland.