How to set up as a contractor in Ireland

If you’ve grown tired of the 9-to-5 grind, and you’re ready to start making a living on your own terms, Ireland is an ideal location to go it alone.

Whether you want to set up shop in the progressive, tech-focused metropolis of Dublin, take inspiration from the rugged, rural landscapes of the west coast, or simply work by the fireside in a cozy Cork pub, there’s no better place to be your own boss.

Before you can embark on your self-employment adventure, though, you’ll need to get to grips with your legal obligations. After all, as the great Irish poet WB Yeats once said, “in dreams begins responsibility.”

Specifically, you’ll need to understand how to:

• Register your business in Ireland

• Avoid misclassification as an employee

• Create compliant contracts that protect you

• Invoice and collect payments from around the world

In this article, we’ll cover all these things. We’ll also help you navigate your tax responsibilities as a self-employed worker, and discuss some of the other risks and liabilities you should be aware of.

First, it’s important to clarify how Ireland defines independent contractors.

What is an independent contractor according to Irish law?

Independent contractors are workers who provide paid services (or products) to another party. However, they are classified differently to employees, and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.

See also: Why businesses hire contractors vs. international employees

When it comes to determining the difference between contractors and employees, the Irish government applies five standard legal tests. Under these rules, you’re generally considered to be a contractor if:

• You’re not obliged or required to accept and complete work

• You delegate (or are able to delegate) the work

• You operate your own business and can make profit or losses from your work

• You’re not an integral part of the company you’re performing work for (i.e. you don’t have a company email address or attend internal company events)

• You control how, when, and where the work is done

When you work with clients, it’s important to be correctly classified to avoid penalties and fines, and to ensure that you are paying the right taxes.

Business registration in Ireland

Before you can begin working as an independent contractor in Ireland, you’ll first need to choose a formal structure for your business. Some of the most popular models include:

• Sole trader: A simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.

• Partnership: A simple partnership agreement. Again, there is no legal separation between the individual and the business; you and your partners are personally responsible for any debts and liabilities.

• Limited company: A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally (i.e. you are only liable for the capital you invest in the company).

There are pros and cons to each of these structures, but most independent contractors choose the sole trader model, as it is fairly simple to set up and operate. If you’re unsure, it’s a good idea to speak with a registered solicitor or accountant first. 

If you do opt for the sole trader structure, you don’t need to register your business or conduct any specific legal formalities. However, you must register as a self-employed person with the Irish Tax and Customs authority. You can do this online through the Revenue Online Service (ROS), or by filling out the TR1 form.

Note that, as a sole trader, your business will automatically operate under your own name, but if you want to use an assumed name for marketing or branding reasons, you will need to register it with the Companies Registration Office (CRO). You can do this online, or by filling out the RBN1 form.

How do I get paid as an independent contractor in Ireland?

As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services like PayPal and Wise

These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides Ireland, the payment collection process can be even more complicated. 

Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in euros — and with no hidden fees. Learn more about how our platform can help.

Independent contractor taxes in Ireland

As an independent contractor, you’re responsible for filing and paying your own taxes and social contributions. Anybody that earns an income of over €5,000 is liable for these taxes. 

The good news is that, as a sole trader, you pay personal income tax on your business profits (using your personal tax number). This means that you do not have to fill out a separate tax return, or pay additional corporate taxes.

You must file and pay your tax return by October 31 each year (this deadline is extended by two weeks if you pay online through ROS). If you miss this deadline, you will be charged interest on what you owe. As in most countries, you pay a preliminary amount based on a self-assessment of your earnings, and then receive the final, calculated amount from the tax office. If you end up owing more than you predicted, the difference will be added to the following year’s tax bill.

In Ireland, there are only two personal income tax rates of 20% and 40%.

In addition, you must, in most cases, make pay-related social insurance (PRSI) contributions of 4% on your gross income (with a minimum annual payment of €500). If your annual income exceeds €13,000, you must also pay a Universal Social Charge (USC) of between 0.5% and 11%, depending on your level of income. Both of these contributions are self-assessed along with your income tax.

On the flip side, you can claim multiple tax credits, including an Earned Income Credit of up to €1,775. You can also claim tax deductions on a whole host of business expenses, such as:

• Rent, utility bills, and other running costs for your business premises

• A proportion of your utility bills if you use a home office

• Vehicle maintenance costs

• Equipment maintenance costs

• Professional services fees (such as accounting)

VAT information for independent contractors in Ireland

As in most countries, Ireland applies a value added tax (VAT) to goods and services sold. As a sole trader, you only need to register for — and charge your clients — VAT if you sell more than €75,000 in goods, or provide services worth at least €37,500 in a year.

The standard VAT rate in Ireland is currently 23%, although some goods and services are charged at the lower rates of 13.5%, 9%, 4.8%, and 0%. The Irish tax office provides a full database of rates for all goods and services.   

Note that, just as you charge your clients VAT, you’ll also be charged on your business expenses. You can reclaim these charges against what you owe, meaning that you effectively pay the difference. In most cases, you must make VAT payments to the tax office every two months using ROS. If you don’t file, you’ll be charged late fees and interest. 

Liability considerations for independent contractors in Ireland

As a sole trader, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.

It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Ireland-based and international clients.

Accounting requirements for independent contractors in Ireland

As a sole trader, you do not need to publish financial statements or accounts. However, you must still keep organized, accurate records of all your income and expenditure, including client invoices, purchase orders, bank statements, and receipts. This will help you correctly file your taxes, give you a stronger picture of your financial situation, and generally make life easier if you are audited by the tax authorities.

You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant.

The dangers of contractor misclassification in Ireland

As we’ve mentioned, independent contractors are classified differently to employees in Ireland. Many of the protections and benefits employees enjoy do not typically apply to contractors.

As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client under the Social Welfare Consolidation Act of 2005.

As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly. You can also reach out to the Scope Section of the Department of Social Protection if you have concerns that you’re being misclassified.

If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.

Use our Contractor Compliance Checklist to avoid misclassification

Work through this checklist to help determine if a new hire should have a contractor or employee relationship.

Download

How do I ask the company I’m working with to convert me to an employee in Ireland?

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.

You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Irish law.

4 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:

1. International payments in countries around the world

Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in euros hassle-free, without any hidden fees.

2. Localized in-app contracts and advice

When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Irish laws, ensuring that you always stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.

4. Tax management

Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received. 

Setting up as a contractor in Ireland

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.

By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for both Ireland-based and foreign clients

• Enhance your invoice management and avoid manual processes

• Comply with local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.