Ireland Inc. and Foreign Direct Investment

New measures not announced in Budget 2026

While Budget 2026 reaffirmed Ireland’s competitive tax environment with extensions and enhancements to key reliefs, the Finance Bill 2025 contains several technical and substantive amendments not detailed in the Budget, including:

• R&D tax credit amendments (Section 34):
  • Beyond the announced increase in the credit rate from 30% to 35%, the Finance Bill introduces technical and administrative changes to streamline the relief and broaden qualifying expenditure, including full recognition of employee emoluments where at least 95% of their time is devoted to R&D activities.
• Intangible Assets (Section 41) and Company Reconstructions (Section 42):
  • The Finance Bill clarifies that balancing allowances must be considered when applying the 80% cap on relevant trading income for intangible asset relief and that allowances claimed but carried forward due to the 80% cap are deemed “made”, which is relevant for the purposes of determining any balancing allowance. It also confirms that successor companies inherit unused capital allowances and associated interest on intangible assets transferred during company reconstructions—technical changes absent from Budget communications.
• Participation Exemption (Section 45):
  • Following last year’s introduction of the participation exemption, there was a lot of engagement with the Department of Finance to simplify the application of the exemption. The Finance Bill broadens the scope of qualifying subsidiaries to include those resident in jurisdictions imposing a non-refundable dividend withholding tax, reduces the required residence period from five to three years, and clarifies that share acquisitions are not treated as business asset acquisitions for purposes of the anti-avoidance provisions.
• Withholding tax on group payments (Section 39):
  • Section 410 which allows for a withholding tax exemption on certain group payments as been extended to groups involving companies’ resident in countries with which Ireland has a double taxation agreement (it previously was restricted to EU, EEA and the UK).
• Pillar Two Implementation (Section 92) and Country-by-Country (“CbC”) Reporting (Section 48) and:
  • The Finance Bill updates Ireland’s transfer pricing and global minimum tax rules, including expanded CbC reporting to align with latest OECD guidance. These technical but critical international tax measures were not part of Budget 2026’s headline announcements.
• Digital Games Tax Credit (Section 44):
  • The Digital Games Tax Credit is extended to 31 December 2031 and is amended to allow claims for qualifying expenditure on post-release content, subject to European Commission approval.
• Offshore Funds and Life Assurance Tax Rates (Section 36):
  • The Finance Bill reduces tax rates on offshore funds and certain life assurance policies from 41% to 38%, effective 1 January 2026.
• Crypto-Asset Reporting Framework (Section 89):
  • Implements OECD 2023 standards for automatic exchange of information on crypto-assets, requiring crypto-asset service providers to report user data to Revenue. This important compliance measure was not announced in the Budget.
• FED and SARP Refinements (Sections 21 and 22):
  • The Finance Bill updates eligibility criteria, increasing the FED cap to €50,000 and raising the minimum salary threshold for new SARP claimants to €125,000 from 2026. It also expands qualifying countries for FED. These detailed legislative amendments were not fully outlined in Budget 2026.
• Foreign Entity Classification (Section 35):
  • The Finance Bill inserts a new provision setting out that a foreign body corporate and its members will be chargeable to tax on the basis that the foreign body corporate is a partnership, where it is substantially similar to an Irish partnership. A review of any such entities in a group structure should take place.  

Who will be affected and why?

Those carrying out or considering R&D activities in Ireland should assess the positive impact of the changes to the R&D Tax Credit regime.

Multinational enterprise (“MNE”) groups that are subject to CbC reporting and Pillar two tax rules should consider the changes in the Finance Bill. MNE groups undertaking company reconstructions or disposals involving intangible assets from 2026 onwards should consider the impact of the “clarified” capital allowance treatment.

Others set to be impacted include crypto-asset service providers and users, who must comply with new reporting requirements starting in 2026.

International assignees and employers utilising SARP and FED, should consider the new salary thresholds and expanded country lists which are effective from 2026.

What now?

All MNE groups should consider the impact of these changes on their business to evaluate any potential benefits and additional compliance requirements. As any uncertainty arises, MNE groups should engage with tax advisors to navigate these changes effectively, ensuring alignment with Ireland’s evolving tax landscape and maximising opportunities arising from Finance Bill 2025.  

Our view

While the measures in relation to R&D tax credits, the participation exemption and other incentives introduced in the Finance Bill 2025 are certainly welcome, there were additional measures that Deloitte had recommended as part of our pre-budget submission, which we believe would better position Ireland for inward investment in an increasingly competitive global tax landscape.  

Deloitte remains committed to guiding clients through these developments, ensuring compliance, and leveraging Ireland’s stable and competitive tax environment to support growth and investment. 

We look forward to continuing to engage with the Department of Finance on the Action Plan to reform the taxation and deductibility of interest in Ireland and review the “R&D Compass” relating to grants and incentives which is due to be published in the coming weeks.