taxation Flashcards
PRSI
pay related social insurance
DIRT
deposit interest retention tax
CAT
capital acquisition tax
PAYE differences between business and household
•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
CAT compare between business & household
•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
local property tax compare between business & household
•is a self assessed tax charged on the market value of residential properties in the state
•households pay LPT but businesses don’t
corporation tax compare between business and household
•certain businesses, limited companies, must pay corporation tax to revenue on their profits while households don’t pay it
what kind of tax is Usc
progressive
is vat indirect or direct tax
indirect
VAT
•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)
corporation tax
•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.
features of PAYE system
•progressive (falls heaviest in high income earners)
•direct (is a direct tax on income earned from employment)
•form based (P12, P45, etc)
tax rates
•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
tax credits
•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
examples of tax credits
•PAYE crédit
•blind crédit
•guide dog allowance
•widow/widower’s credit
PAYE
•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
implication of PAYE for business
•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
implication of VAT on business
•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
corporation tax implications on business
•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
form p45
•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
when is form p45 required by the employee
•entering new employment- new employer require p45 to calculate correct amt of tax payable
•claiming social welfare benefits or a tax refund
form p60
•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
when is form p60 required
•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
form p21
•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
what does the form p21 indicate
•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
