This article is for Irish company directors and founders who need to understand whether their company is "trading" and what that means for their tax obligations.If you're confused about when to register for corporation tax, whether your business activities count as trading, or what happens if you get the timing wrong, this guide covers the legal definition of trading, when your tax registration deadline actually starts, and the key differences between trading and non-trading companies.
Key Takeaways
• Trading companies must register for corporation tax within one month of their first sale or revenue, not from incorporation date.
• Trading income is taxed at 12.5% while passive investment income faces 25% corporation tax in Ireland.
• You're trading when you receive your first customer payment, not when you incorporate or buy equipment.
• Late tax registration penalties range from €500 to €3,000, plus interest on any back-dated tax owed.
• Holding companies are non-trading but still require annual returns, financial statements, and corporation tax registration.
Your company starts trading when you make your first sale, provide your first paid service, or begin receiving revenue from business operations. Simply registering your company, opening a bank account, or designing your website doesn't count as trading—you need actual revenue-generating transactions.
Do I need to register for corporation tax if I haven't made any profit yet?
Yes, you must register for corporation tax within one month of starting to trade, regardless of whether you're profitable. Trading is about activity, not profitability—many companies trade at a loss for years but still need to register and file returns.
What's the difference between a trading and non-trading company?
Trading companies actively conduct business operations to generate revenue through sales, services, or commercial activities. Non-trading companies exist for ownership or administrative purposes—like holding companies that only own shares in other companies, or dormant companies with no significant transactions.
What happens if I miss the one-month deadline to register for corporation tax?
You'll face Revenue penalties ranging from €500 to €3,000 depending on how late you are and your circumstances. You'll also need to file returns retroactively, pay interest on any tax owed from when you should have paid, and face increased risk of Revenue audits.
Can I just declare my company as non-trading to avoid registration requirements?
No, you can't simply choose your trading status. Revenue and the courts will look at your actual activities to determine if you're trading—what you call yourself doesn't matter, only what you actually do counts.
Does Ireland's 12.5% corporation tax rate apply to all company income?
No, the 12.5% rate applies specifically to trading income. Passive income like rental or investment income is taxed at 25%, and capital gains are taxed at 12.5% but under different rules than trading profits.
If I'm testing the market with small sales, do I need to register for tax?
Yes, if you're receiving payments from customers—even small amounts—you're trading and must register. Market testing that involves actual transactions counts as trading, regardless of the scale.
What if I'm not sure whether my company is trading yet?
When in doubt, register for tax—there's no penalty for registering "too early," but there are penalties for registering late. Document your transactions, consult with an accountant before your first revenue-generating activity, and keep evidence of your business activities to justify your position if questioned.
