Business Deposit Account, What Taxes Are Applied?

[blobert]

Hi Guys,

If my Ltd company opens a 1 year fixed term deposit account and puts in €100,000 for a year, just wondering what taxes are applicable?

I'm assuming DIRT applies?

What about Corporation Tax?

Any advice would be much appreciated!

Thanks

 

[Gervan]

A company can opt to receive interest gross and pay tax when doing the year end submission. The advantage would be use of the otherwise-deducted Dirt for a time.

The tax rate paid by a company on non-trading income was 25%. I'm not sure if that has gone up now.

 

[blobert]

Thanks for the reply.

So it would essentially be charged DIRT at 27% and then taxed at 25%?

Ouch

So if I had €100,000 on deposit @4.25% for a year

I'd get €4250 interest
Pay €1147.50 DIRT
Have €3102.5 left and
Pay €775.63 Corporation Tax at 25%

Leaving: €2326.87 after tax

Does that look about right?

 

[Joe_90]

If the company is controlled by 5 or fewer people then the deposit interest is subject to a further surcharge of 20% of the after tax income if that income is not distributed.

DIRT is a withholding tax not a tax in itself.

Interest €4,250
CT @25% = €1062.5
Surcharge = €637.5
Effectively making the tax rate 40%
Net €2,550

If the company has paid DIRT it can claim it as a credit against the above.

 

[blobert]

Thanks Joe,

Company owned by one person so I'm guessing it applies.

Will most business deposit accounts charge DIRT and then you claim it as a credit?

 

[Gervan]

So it would essentially be charged DIRT at 27% and then taxed at 25%?

No, if Dirt had been paid that would be allowed as a credit against final corporation tax due. You don't pay both.
When Dirt was 20% companies were paying a further 5% on their interest income. I am not aware that the CT rate for interest income has increased from 25% but it would seem strange if not.