taxation

Question 1

PRSI

Answer 1

pay related social insurance

Question 2

DIRT

Answer 2

deposit interest retention tax

Question 3

CAT

Answer 3

capital acquisition tax

Question 4

PAYE differences between business and household

Answer 4

•households pay PAYE on their income if they’re employees or self employed. PAYE is collected at source by the employer
•businesses collect and deduct PAYE from employees gross wages & send the money to revenue. businesses like limited companies don’t pay PAYE on profits

Question 5

CAT compare between business & household

Answer 5

•both households and businesses are liable to pay CAT on any profit made from the sale of the asset
•if make a profit or gain when u dispose an asset, u pay CAT on the chargeable gain (usually the diff between the price u paid and price u disposed it for)
•can deduct allowable expenses like cost of acquiring & disposing of asset

Question 6

local property tax compare between business & household

Answer 6

•is a self assessed tax charged on the market value of residential properties in the state
•households pay LPT but businesses don’t

Question 7

corporation tax compare between business and household

Answer 7

•certain businesses, limited companies, must pay corporation tax to revenue on their profits while households don’t pay it

Question 8

what kind of tax is Usc

Answer 8

progressive

Question 9

is vat indirect or direct tax

Answer 9

indirect

Question 10

VAT

Answer 10

•a tax on goods and services paid by customers and business.
•standard rate is 23%
•various rates of vat depending on type of g/s being sold
•eg. 0% (medicine, food staples, etc)

Question 11

corporation tax

Answer 11

•annual tax on company profits
•currently 12.5% in ireland, one of lowest worldwide
•tax is calculated based on company’s net profit position. is seen as a major factor in attracting FDI in ireland.

Question 12

features of PAYE system

Answer 12

•progressive (falls heaviest in high income earners)
•direct (is a direct tax on income earned from employment)
•form based (P12, P45, etc)

Question 13

tax rates

Answer 13

•income is taxed at two different rates. rate of tax depends on lvl of taxable income
•current tax rates are standard rate of 20% up to a certain income and higher rate of 40%
•20% applies to tax band of €40,000 and 40% applies to balance of taxable income

Question 14

tax credits

Answer 14

•gross tax - tax credits = tax payable
•under tax credit system a taxpayer is entitled to tax credits depending on each persons personal circumstance eg married persons tax credit, employee tax credit, etc
•can be used to reduce tax liability calculated in gross pay and are non refundable
•unused tax credits in a pay week/month are carried forward to subsequent pay periods within the tax year

Question 15

examples of tax credits

Answer 15

•PAYE crédit
•blind crédit
•guide dog allowance
•widow/widower’s credit

Question 16

PAYE

Answer 16

•direct tax on income earned from employment
•remitted by business every month to revenue commissioners
•deducted at source by employer and passed to revenue commissioners

Question 17

implication of PAYE for business

Answer 17

•progressive tax as the more income you earn the more tax you pay, high rates of PAYE are a disincentive for ppl to do overtime, affecting business ability to meet sales orders
•administrative cost for business, many diff taxation forms eg. P21, P12

Question 18

implication of VAT on business

Answer 18

•high rates on raw mats and components increase cost of production, affecting margins and cash flows
•high rate increases purchased price for consumers, reducing demand for goods and services of business
•collection of VAT is a significant administrative cost

Question 19

corporation tax implications on business

Answer 19

•relatively low in ireland encouraging irish entrepreneurs and foreign investors to set up here. if higher, could act as disincentive to FDI
•corporation tax reduces size of profits and amt available as retained earnings, could pressure business to borrow money, leading to high gearing

Question 20

form p45

Answer 20

•issued by employer to employee on the cessation of employment
•provide info of amt of gross pay, tax, and prsi paid by employee up to the date of leaving employment

Question 21

when is form p45 required by the employee

Answer 21

•entering new employment- new employer require p45 to calculate correct amt of tax payable
•claiming social welfare benefits or a tax refund

Question 22

form p60

Answer 22

•issued by employer to employee after end of the financial/tax year
•shows gross pay, income tax, and prsi paid by employee in the specified financial year

Question 23

when is form p60 required

Answer 23

•claiming refund on overpaid tax- employees should check their form p60 against their tax credits to ensure they’ve not been overtaxed
•claiming refund on PRSI contributions overpaid
•claiming refund on Health contribution where income was below the threshold

Question 24

form p21

Answer 24

•known as a balancing statement
•end of year summary of an employees tax situation & contains info of income, allowances and calculations of tax payable at the various rates for the year

Question 25

what does the form p21 indicate

Answer 25

•if an employee has overpaid or underpaid tax for the year
•if overpaid, Inspector of Taxes will issue a tax refund
•if underpaid, Inspector of Taxes will issue a tax demand