Domestic Direct Investment

What has changed since Budget 2027?

Following the Budget 2027 announcements, Finance (No.2) Bill 2026 (“Finance Bill” or “the Bill”) largely gives legislative effect to the measures announced on Budget Day, while introducing a number of additional technical changes relevant to domestic businesses and investors. 

As announced in Budget 2027, the Finance Bill confirms:  

• Reduction in the general CGT rate from 33% to 31% on the disposal of assets from 7 October 2026. No changes were introduced in the Bill to the rate applicable to disposals of development land, as well as unquoted shares deriving most of their value from such land, which will remain at 33%. 
• For gifts and inheritances from 7 October 2026, Capital Acquisitions Tax (CAT) tax-free thresholds increase to €420,000, €44,000 and €22,000 for Groups A, B and C respectively.  

The Bill also extends the CAT exemption for normal and reasonable payments for the support, maintenance or education of minor children, or children aged under 25 in full-time education, so that it may apply where only one parent or civil partner has passed away. 

The Bill separately clarifies that transferring relevant business property to a successor company following a merger or division will not, by itself, cause CAT Business Relief already claimed to be withdrawn. It also contains measures to assist qualifying sporting bodies incorporating as companies limited by guarantee, as well as improvements to the Succession Farm Partnership credit and transfer timing. 

For SMEs, the Bill raises the preliminary corporation tax threshold for classification as a small company from €200,000 to €350,000 and introduces a conditional further-payment option. It also extends start-up company corporation tax relief to qualifying new trades commencing by 31 December 2030 and contains changes to the timing of reporting under the Enhanced Reporting Requirements (ERR), with revised requirements to apply from 1 January 2027.  

For businesses, the Bill proposes a welcome simplification of certain interest relief rules, making it easier to obtain and retain interest relief on borrowings used for qualifying lending and investment activities. The changes have been touted as a first step in the wider review of Ireland’s taxation of interest – an area to watch. 

The Bill also confirms enhancements to the R&D tax credit, including increased limits for outsourced R&D, a new 105% measure for qualifying employee costs, and an increase in the first instalment of the credit from €87,500 to €105,000. 

For individuals, perhaps the most notable development is the proposed new Individual Investment Account. Eligible Irish tax-resident adults will be able to contribute up to €12,000 annually. An annual 1% tax will apply to the average value of eligible investments and cash above €50,000, while income, profits and gains on eligible assets within the account will otherwise be exempt from tax.  

Who is affected, and when? 

The measures impact entrepreneurs, start-ups, SMEs, large private enterprises, family businesses, farming partnerships, sporting bodies and individual investors.  

The CGT reduction and increased CAT thresholds apply from 7 October 2026. Other measures apply from 2027 or under specific commencement provisions, with the new Individual Investment Account subject to a commencement order and expected to be available from 1 July 2027. 

What does this mean for businesses?

The reduction in the standard CGT rate, which is already effective, will be particularly relevant to business owners considering the sale of shares or other assets (other than development land). Together with the increased CAT thresholds, it should also be factored into succession planning for family and owner-managed businesses. 

The preliminary corporation tax changes should provide greater cash-flow and compliance benefits for certain SMEs. The targeted CAT Business Relief amendment offers greater certainty for qualifying company reorganisations. For employers, changes to ERR will amend the timeframe for reporting certain benefits from 1 January 2027, with the detail to be set out in updated regulations. 

For Succession Farm Partnerships, the higher annual credit and removal of the three-year waiting period provide greater flexibility over the timing of asset transfers.  

Corporate groups should also consider the changes to interest relief in the context of existing and proposed acquisition or investment financing, while R&D-active businesses should assess the benefit of the enhanced credit provisions.

What should businesses do now? 

Business owners considering a sale or succession should revisit existing plans in light of the reduced CGT rate and increased CAT thresholds. Careful planning remains essential to ensure the conditions for any relevant reliefs continue to be met. 

Families considering a company reorganisation, farming partnerships planning a transfer, and sporting bodies considering incorporation should test the relevant relief conditions before acting. Individuals can review the proposed Individual Investment Account rules but cannot yet open an account under them. Start-ups and investors should monitor further detail on the announced investment-relief proposals. 

Corporate groups with acquisition or investment financing should assess the impact of the revised interest relief provisions, while R&D-active companies should review whether the enhanced credit affects planned expenditure or future claims. SMEs should also consider whether the revised preliminary corporation tax rules change their payment and cash-flow forecasts.

Our view

The reduction in the standard CGT rate is welcome, but it remains a modest change. A more competitive CGT regime would provide a stronger incentive for business owners considering a sale, succession or reinvestment. 

For indigenous businesses, some of the Bill’s more practical measures may prove valuable. The proposed simplification of section 247 interest relief should be helpful for corporate groups with acquisition or investment financing, while enhancements to the R&D tax credit, including increased outsourcing limits and a higher first-year instalment, provide further support for innovative businesses. The increase in the small-company preliminary tax threshold should improve cash-flow for growing companies. 

The changes to Succession Farm Partnerships and CAT Business Relief are also welcome, removing potential tax friction from genuine succession and business reorganisations: a qualifying company reorganisation should not, of itself, put relief already claimed at risk. 

The proposed Individual Investment Account brings a fresh dimension to domestic direct investment. Its value will depend on whether the rules are straightforward for individuals to use when the account becomes available and indeed if the scope of the regime is extended. The sporting-body measures likewise recognise that incorporation should not create an unnecessary tax obstacle for qualifying sporting organisations. 

Overall, the Bill contains a number of sensible and targeted improvements, although it stops substantially short of a fundamental reset of the tax environment for indigenous enterprise.