Revenues and corporation tax: an illustrative example

This is an illustrative example of a company with an annual revenue of €1 million that has borrowed money to invest in new equipment or premises and has relatively high operating costs. It demonstrates how a company’s corporation tax liability may only be a small proportion of its revenue.

Total Revenue€1,000,000
Operating costs (e.g. costs relating to providing services, maintaining equipment, plant and premises and purchasing raw materials)(€650,00)
Administration costs (e.g. staff, property costs)(€75,000)
Annual deduction for capital expenditure)(€150,000)
Interest (i.e. relief on debt interest costs arising from borrowings to fund expansion)(€100,000)
Profit before tax€25,000
Corporation tax at 20% of profits€5,000