If your company is a "close company" (controlled by 5 or fewer participants, which includes most Irish SMEs), undistributed income may attract an additional surcharge.
Under Section 440 TCA 1997, a 20% surcharge applies to undistributed investment and rental income. A 15% surcharge applies to undistributed professional services income (accountants, solicitors, consultants, doctors). The surcharge is in addition to corporation tax already paid.
Distribute the income as dividends within 18 months of the accounting period end. The dividends will be subject to income tax in the shareholder's hands, but the surcharge is eliminated.
A "close company" is one controlled by 5 or fewer participants (shareholders or directors). This includes the vast majority of Irish owner-managed businesses, family companies, and professional practices.
A consulting company earns EUR 200,000 in professional services income. After paying corporation tax at 12.5% (EUR 25,000), the company retains EUR 175,000. If it does not distribute this as dividends within 18 months, a 15% surcharge applies: EUR 175,000 x 15% = EUR 26,250 in additional tax. The effective rate on retained income jumps from 12.5% to over 25%.
The 20% surcharge on investment and rental income is higher than the 15% surcharge on professional services income. If your company holds investment property or earns interest, the pressure to distribute is even greater.
Disclaimer: This information reflects the 2026 tax year. Tax rules change annually following the Budget. Check Revenue.ie for the latest rates and thresholds. This guide is for informational purposes only and does not constitute tax advice.