Financial Services

Key measures

• The Finance (No.2) Bill 2026 (“Finance Bill” or “the Bill”) includes the provisions to legislate for the much publicised Individual Investment Account. The Individual Investment Account is intended to encourage investment of domestic savings, with a proposed launch on 1 July 2027. The draft legislation features a €50,000 tax-free threshold, a 1% tax on balances above €50,000, and a €12,000 annual maximum contribution. The investment account tax is a final liability to tax and the relevant income, profits or gains will not be liable to further taxation. The account provider, rather than the holder, is expected to administer applicable tax. The draft legislation also sets out conditions for eligible providers, eligible assets, the precise tax base and calculation, and provider obligations. 
• As announced in the Budget, the draft legislation reduces the CGT rate from 33% to 31% and Investment Undertaking Tax (IUT) and Life Assurance Exit Tax (LAET) rates from 38% to 35%.  
• As expected, the Bank Levy has been extended for a further year. For 2027, the levy will apply at the rate of 0.1025 % on the value of deposits held by in scope banks on 31 December 2024. 
• With respect to the interest as a charge provision in section 247 and the associated recovery of capital provisions under section 249, a number of amendments have been introduced. The amendments provide for simplifications to the existing provisions governing interest relief on borrowings taken out for certain lending and investment activities. 
• The draft legislation significantly increases the threshold for treatment as a small company for preliminary corporation tax purposes, from €200,000 to €350,000. There are also favorable amendments which allow for a top up payment within 4 months of year end where at least 80% of the current year liability has been satisfied.  
• A number of proposed amendments have been made to the Pillar Two legislation. These amendments will primarily reflect the agreement of the OECD Side-by-Side Package which was released in January, and gives effect to safe harbours in the agreements, namely: 
  • The simplified ETR Safe Harbour 
  • The Substance-based Tax Incentive Safe Harbour 
  • The UPE Safe Harbour  
  • The side-by-side Safe Harbour, and 
  • The extension of the existing Transitional CbCR Safe Harbour 

Further detail on the Pillar Two changes can be found here.

Who is affected, and when?

The measures will impact a broad range of financial services stakeholders including banks, investment firms, insurance undertakings, UCITS and other financial services industry participants.  

In particular, the introduction of the Individual Investment Account presents a significant opportunity for investors and providers alike. 

While most of the changes were well signposted, it is important at this stage for relevant stakeholders to carefully consider the provisions as drafted in advance of committee stage and feedback any comments accordingly. 

Our view 

The proposed reduction in investment tax rates and the Individual Investment Account point towards a more attractive environment for retail investment and should incentivise individuals to look beyond merely holding savings in deposit accounts, but their practical impact will depend on investor engagement.  

Companies considering providing Individual Investment Account should consider the requirements which must be met to become a “Qualifying Account Provider”, as well as the operational practicalities of doing so. In particular, there are a number of registration and reporting obligations in respect of the Individual Investment Account which should be carefully evaluated to ensure operational readiness as the measures come into force.  

The changes to the preliminary tax rules are a positive development. Increasing the small-company threshold for preliminary tax purposes should assist in bringing greater certainty to preliminary tax calculations for some companies. Although large companies will still need to estimate their liability before year-end, the new top-up payment rules provide for a greater ability to reduce or eliminate potential interest liabilities arising on underpaid preliminary tax. 

The Department of Finance has undertaken a consultation phase on the taxation of interest and has received feedback from relevant stakeholders on the matter. As a result of this the Finance Bill includes some amendments to the interest as a charge relief provisions. However work in this area is ongoing and we understand that further amendments to the taxation of interest are expected in the future. 

The proposed changes to Ireland’s Pillar Two legislation are a welcome step towards simplifying calculations and easing the administrative burden for groups within scope, particularly those headquartered in the US. 

Overall, the financial services measures included in Finance (No. 2) Bill continue to demonstrate a commitment to a competitive regime but also a recognition of the complexity which exists in the current system , balancing measures which seek to reduce administrative burden with measures to enhance the overall competitiveness of the tax regime.