Close Company Surcharge Ireland: A Guide for Owner-Managed Companies

What makes a company close

Revenue describes a close company as an Irish resident company controlled by five or fewer participators, or by participators who are directors. Control and participator are broad concepts that can include voting rights, share capital, income rights, loan capital and indirect access to company assets.

A typical founder-owned or family company is therefore often close from its first day. Stock-exchange ownership and certain excluded ownership structures differ, but the ordinary private LTD should not assume the rules are irrelevant merely because it carries on a genuine trade.

Investment and estate income surcharge

Revenue's current public guidance states that a 20% surcharge applies to undistributed after-tax estate and investment income. The categories include rental income, interest and dividend income. A trading company may receive a 7.5% reduction in calculating the distributable amount, subject to the rules.

The surcharge is reduced where relevant income is distributed within 18 months of the end of the accounting period in which it arose. Revenue also describes an exclusion where the excess distributable estate and investment income over distributions is €2,000 or less, with associated-company rules affecting the limit.

• Identify rental, interest, dividend and other non-trading income.
• Confirm the company's close-company status.
• Calculate after-tax distributable income correctly.
• Track qualifying distributions within the 18-month window.
• Report the surcharge in the correct CT1 period.

Professional service company surcharge

Close service companies can face a different surcharge: 15% on one half of undistributed trading income. Revenue lists professions and professional services and gives examples including doctors, dentists, architects, solicitors, accountants, actuaries, actors, computer programmers and engineers.

Classification is not decided by the company's marketing label alone. The source of income, activities performed, ownership and statutory definition matter. A consultancy or technology founder should ask the accountant to address service-company status explicitly rather than assume all trading profits are treated alike.

Why a dividend is not an automatic fix

A distribution may reduce surcharge exposure, but it can create Dividend Withholding Tax, shareholder Income Tax and cash-flow consequences. Company law also restricts distributions to profits available for that purpose. The directors need reliable accounts and proper approvals.

Compare the company and shareholder position before declaring anything. Leaving cash in the company, paying salary, contributing to a pension, making a dividend and reinvesting in the trade are not interchangeable decisions. Each has separate legal and tax conditions.

Plan before the 18-month window ends

Segment trading and passive income in the bookkeeping, review close-company status during the accounts process and diarise the distribution window. The surcharge for one accounting period is generally collected as part of the CT liability of the subsequent accounting period, so the issue can span more than one set of accounts.

Ask for a written calculation showing the income included, Corporation Tax deducted, reductions, distributions, exclusions and resulting surcharge. That turns an unfamiliar adjustment into a decision the directors can understand and document.