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Distinguish between VAT and Corporation Tax - Leaving Cert Business - Question 9 - 2016
Question 9
Distinguish between VAT and Corporation Tax. VAT (Value Added Tax) is a tax on goods and services paid by both consumers and businesses on consumer spending. The st... show full transcript
Worked Solution & Example Answer:Distinguish between VAT and Corporation Tax - Leaving Cert Business - Question 9 - 2016
Step 1
What is VAT?
Answer
VAT (Value Added Tax) is imposed on goods and services and is paid by consumers and businesses based on consumer spending. The standard VAT rate is 23%, but this can vary depending on the type of goods or services. For instance, essential items like medicine may have a 0% rate, while certain tourism-related services (e.g., restaurants, hotels) might have a reduced rate of 9%.
Step 2
What is Corporation Tax?
Answer
Corporation Tax is an annual tax levied on a company's profits. In Ireland, the corporation tax rate is 12.5%, which is significantly lower than many other countries and is a key attraction for foreign direct investment (FDI). The tax is calculated using the company's net profit figures. It is important to note that companies engaged in non-trading activities face a higher rate of 25%.