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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/tax on consumer spending. Th... show full transcript
Worked Solution & Example Answer:Distinguish between VAT and Corporation Tax - Leaving Cert Business - Question 9 - 2016
Step 1
VAT (Value Added Tax)
Answer
VAT is a tax imposed on the consumption of goods and services, applicable to both consumers and businesses. The standard VAT rate is 23%, although there are reduced rates depending on the nature of the goods or services. For example, essential items, such as medicine and food staples, can be exempt from VAT (0% rate), while tourism-related services like restaurants and hotels may benefit from a special reduced rate of 9%.
Step 2
Corporation Tax
Answer
Corporation Tax is levied on a company's profits. In Ireland, the corporation tax rate is currently set at 12.5%, which is considered one of the most competitive rates globally. This tax is calculated based on the net profit of the company, making it an important aspect of financial reporting and planning. The favorable rate is advantageous for encouraging foreign direct investment (FDI) as it attracts international businesses to set up operations in the country.