Taxes

Taxes you need to pay, when you set up a business as a self-employed, a partnership or a limited company:  As a self employed, you are responsible for paying your own tax and National insurance contributions. This is usually a very difficult phase for most self-employers, especially those with very low initial capital but be warned, register immediately with the appropriate local office to avoid penalties. You will then be informed on further procedures to take depending on your country of residence.

Most offices will provide you with tax return forms, which you will need to complete each year, outlining the earnings you obtain for that particular tax year. The information you provide will be used to calculate how much income tax you will have to pay, don't forget the submission deadlines. Keeping your business records (for at least 5 years ) and detailed information about your earnings is very essential. This is to avoid filling in wrong figures in your tax return forms. It also helps to run your business efficiently and  effectively.

Your business records should comprise of all sales and purchase invoices, bank statements, receipts of your expenditures, cashbooks, payroll, inventory of available stock, money taken out of the business for personal use etc. All these information could be noted on a computer or on paper. If you choose to keep your records electronically then try to scan all documents and do not forget to backup your data. You will need to keep records for each business incase you have more than one business.

If you form a partnership, each partner will have to register himself by the National Revenue and complete annually a tax return form. A partnership tax return form showing share of profits and losses between partners must also be completed. The tax to be paid depends on each partner share in profit. Just like the self-employed, record must to kept for at least 4-years.

There are different types of taxes:
Income Tax:  All employment earnings (self-employed ), pensions income, dividends, interest on savings are taxable however there are certain non taxable classes. There is also a certain amount of income one receives each year as tax-free, this is usually below €10,000. People with disabilities are also entitled to tax-free allowances, for more details contact your National Revenue/local office

Turnover Tax (VAT): This tax must be paid if your business turnover exceeds a certain threshold. A VAT return is submitted at regular intervals, usually quarterly. If at the end of the year, the amount charged on sales is greater than that on purchase, then you will have to send the difference to your National Revenue Office.

Corporation Tax: Partnership can be solely made up of individuals, companies or a mix of the two categories. Corporation tax is paid by partnership made entirely of companies. They will have to submitted a corporation tax return form outlining profits and losses of each partner. Note that partners are jointly held responsible for any false entries in the tax return forms.

Trade Income tax: all registered business must pay annually a trade income tax, which usually depends on the business profits. However self-employed professionals such as Lawyers, doctors, architects, farmers, NGO's, journalists etc. are exempted from paying trade income taxes.

You will also need to pay your National insurance, which often depends on the profits of your business. In certain cases one could be exempted from paying. Please get more information from your National insurance office or the appropriate office in your country.