Ireland Inc. and Foreign Direct Investment

Key measures for Ireland Inc. and Foreign Direct Investment

Budget 2027 includes several tax measures relevant to Ireland’s international competitiveness and its attractiveness as a location for foreign direct investment (“FDI”).

Consistent with recommendations set out in Deloitte Ireland’s Pre-Budget 2027 submission, the Research and Development Tax Credit (“RDTC”) is being enhanced to better reflect how R&D is undertaken in practice. The existing credit remains at 35% of qualifying expenditure, but improvements were announced to support collaboration, cashflow and participation by smaller R&D projects.

Helpfully, subcontracting limits for universities, institutes of higher education and unconnected third parties are being increased to the higher of 20% of qualifying expenditure or €200,000. The first-year payment threshold is also increasing from €87,500 to €105,000, which should improve the cashflow benefit for companies with smaller claims.

A new provision to allow claimant companies increase their qualifying cost base by 5% of qualifying R&D wage costs, subject to sufficient expenditure. A further positive change will allow regulated clinical trials to satisfy the science test, reducing administrative burden where applicable. Furthermore, a change is proposed to improve the recognition of the RDTC for the purposes of preliminary corporation tax.  

The Knowledge Development Box is being extended to 1 January 2032, with a time-limited option for existing claimant companies to elect out of the regime, subject to conditions.

One of the headline announcements is a reduction in the standard rate of Capital Gains Tax (“CGT”) from 33% to 31%, applying to disposals made on or after 7 October 2026. The 33% rate continues to apply to disposals of development land.

The Minister announced further changes to Ireland’s Pillar Two rules as part of the Finance Bill, to adopt the agreement of the OECD Side-by-Side package and further agreed Administrative Guidance earlier this year.

Particularly relevant for many multinational companies is the announcement of a simplification measure to Ireland’s interest regime. Additional details will be announced in the Finance Bill.

The Budget also provides for administrative changes to preliminary corporation tax, including an increased small company threshold from €200,000 to €350,000. An additional change was announced whereby preliminary tax requirements will be satisfied where at least 80% of the current year liability has been paid by the final preliminary tax instalment date and a top-up payment to reach 100% of the liability is made within four months of the end of the accounting period. Finally, the Minister announced the removal of a 45% deeming provision where there is an underpayment of the second instalment of preliminary corporation tax.

Budget 2027 also announced an extension to Section 486C start-up relief for new companies to 31 December 2030. An introduction of personalised deduction rates for PSWT instead of the flat withholding rate at 20% has been announced in the Budget.

Changes to Enhanced Reporting Requirements with employers having the option to continue reporting real time, or to report by the 14th of the following month with respect to certain tax-free payments.

Who will be affected and when?

These measures will affect multinationals, Irish-headquartered groups, R&D-intensive businesses and companies within the scope of Pillar Two. Some measures apply immediately from 7 October 2026, while others take effect from 1 January 2027 or will be legislated for in the Finance Bill.

What now?

Businesses should review the Budget measures in the context of investment plans, R&D activity, funding structures and tax compliance obligations. Groups considering disposals should factor in the revised CGT rate and effective date.

The revisions to the preliminary corporation tax rules will impact many companies, in particular those which marginally breached the previous “small” company preliminary tax threshold of €200,000. Any R&D intensive companies should benefit from the proposed changes to improve the recognition of the RDTC for the purposes of preliminary corporation tax, where the credit is used to offset against the corporation tax liability.

Multinational groups should monitor the Finance Bill for the detailed Pillar Two amendments, enhanced safe harbour provisions and the proposed simplification of the interest regime.

Deloitte's view on Budget 2027 measures

From an Ireland Inc. perspective, Budget 2027 is directionally positive. The measures do not fundamentally reshape Ireland’s tax offering, but they strengthen several areas that matter to multinational companies.

The RDTC enhancements are particularly welcome. In an increasingly competitive global environment, Ireland needs to continue demonstrating that it supports innovation, and R&D activities carried out in Ireland.

The updates to the preliminary corporation tax thresholds are a welcome change and together with the proposed improved recognition of the RDTC should provide more administrative certainty for companies and provide potential cashflow benefits.

The Pillar Two amendments reflect the continuing complexity of the international tax landscape. For multinational groups, certainty and timely implementation will be critical.

While these tax changes are welcome, the Minister for Finance’s commitment to invest a quarter of a trillion Euro in infrastructure over the next 10 years, alongside the increased focus on energy costs, is also significant. Taken together, these measures continue to support Ireland’s competitiveness as a location for foreign direct investment.

Overall, Budget 2027 reinforces Ireland’s commitment to remaining competitive, but businesses should engage early with the detail to understand how the measures apply to their specific operations, investment profile and future growth plans.