Finance Bill 2025 commentary

Introduction

Finance Bill 2025 (“the Bill”) was published by the Government on 16th October 2025, setting out the legislative framework for the €1.3 billion tax measures announced by Minister for Finance Paschal Donohoe as part of Budget 2026. Notably shorter than in recent years, the Bill largely reflects anticipated measures but also introduces provisions that were not announced on Budget Day – some surprising, others less so. 

The main Domestic Direct Investment (DDI) relief announced in Budget 2026 was the increase to the Entrepreneur Relief lifetime limit. The Bill clarifies that the increased lifetime limit of €1.5 million applies to chargeable gains arising from disposals on or after 1 January 2026.  This means that entrepreneurs will benefit from the lower 10% CGT rate on a larger amount of gains over their lifetime, providing enhanced support for business owners looking to realise value from their enterprises. 

However, it is disappointing that further measures aimed at supporting Irish indigenous entrepreneurs and small to medium-sized enterprises (SMEs) are absent from the Bill. Notably, the headline CGT rate remains unchanged at 33%. In our view, a reduction in this rate is essential to maintain Ireland’s competitiveness, encourage domestic entrepreneurship, and facilitate timely succession planning. 

As expected, legislation to increase the Research & Development (R&D) tax credit from 30% to 35%, along with an increase in the first-year payment threshold to €87,500, is included in the Bill. It also provides a new deeming measure to allow companies with staff spending not less than 95% of their duties in the carrying on of R&D activities to claim 100% of their emoluments as qualifying expenditure.  The effective date for these changes is confirmed to apply in respect of accounting periods that have a corporation tax (CT1) return filing deadline on or after 23 September 2027.  Generally, this means companies with an accounting period end of 31 December 2026. New claim procedures and administrative clarifications are also included. We look forward to the publication of the R&D Compass and to engaging with the Department of Finance and relevant stakeholders on its development. The R&D Compass is intended to set out the future direction of travel for R&D and innovation supports in Ireland. 

The Finance Bill provides for the extension of the Special Assignee Relief programme (SARP) for 5 years to 31 December 2030. It was flagged on Budget Day that SARP simplification measures would be provided for in the Bill, unfortunately the provisions seem counter to the stated intentions of simplification.  

In addition to the expected changes to the Participation Exemption regime for foreign sourced dividends and distributions, the Bill includes a few welcome clarifications on practical issues with the regime.  

There is no additional clarification on the change to the VAT rate on the sale of apartments, which was introduced with effect from midnight on Budget night by Financial Resolution.  We are anticipating further changes as the Bill moves through the legislative progress to provide clarity on the practical application of this measure. We will be engaging with the Department of Finance on this measure to reflect our clients’ concerns and the practical issues we foresee.   

Our view

Finance Bill 2025 sets out important legislative measures that reflect the Government’s tax policy priorities for Budget 2026. While the increase in the Entrepreneur Relief lifetime limit and the enhancement of the R&D tax credit represent positive steps towards supporting entrepreneurship and innovation, there remains a clear need for further reforms—particularly in relation to the headline CGT rate - to ensure Ireland remains competitive and continues to foster domestic business growth.  

As the Bill advances through the legislative process, we will be involved in proactive engagement with government officials and rigorous analysis, delivering timely, expert insights that equip our clients to navigate and capitalise on the evolving tax landscape. 

Next steps

We encourage readers to keep watch for our updated analysis of any amendments proposed at Committee Stage and Report Stage of the Bill.   

To read our insights and perspectives on Budget 206 visit our Budget 2026 hub.