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Deloitte Pre-Budget 2025 Submission to Department of Finance

Innovate Ireland: Simple Taxes, Thriving Businesses, Sustainable Future

Budget 2025 should focus on sustainability, broadening the tax base, diversifying the Irish economy and sustaining Foreign Direct Investment while doubling efforts to support Domestic Direct Investment, Deloitte’s pre-budget 2025 submission recommends.




Our submission outlines the next steps Ireland needs to take in order to improve its value proposition both for attracting FDI but also in refocusing our efforts on helping domestic companies and creating an environment for those businesses to thrive. The tax policy measures outlined in this submission are designed to fortify Ireland against future shocks while seizing the opportunities of a dynamic global landscape.  

“The formulation of Budget 2025 is a pivotal moment, presenting both challenges and opportunities in an increasingly shock-prone world. Our pre-Budget 2025 submission ‘Innovate Ireland: Simple Taxes, Thriving Businesses, Sustainable Future’ outlines strategic tax measures designed to address these challenges while capitalising on opportunities to enhance economic stability, growth, competitiveness, and equity.”   

Daryl Hanberry, Partner, Head of Tax and Legal

Budget 2025 - Deloitte core recommendations 

While our Pre-Budget submission provides an in-depth view on various topical areas, core recommendations include:  

Our recommendations to move Ireland to becoming a leading decarbonised economy focus on: 

  • Decarbonisation tax credit: Introduce a new qualifying refundable decarbonisation tax credit, which should be closely aligned to the R&D tax credit with a repurposed science test and a focus on costs incurred in seeking to reduce carbon emissions.
  • Relief for investment in renewable energy generation: Re-introduce the former section 486B TCA 1997 relief to encourage corporate shareholders to invest in renewable energy projects, allowing the relief to be used to shelter income or gains taxed at the higher rates of 25% and 33%.
  • Extend the participation exemption to the sale of companies that host early-stage renewable energy projects.
  • Pre-trading expenses: Update rules to ensure that all vouched pre–trading expenditure in relation to renewable energy projects is deductible or at the very least expenditure in a 7-year window is deductible.
  • Grid connection costs: Clarify the tax treatment of such costs.
  • RCT: Allow an initial 0% rate of withholding tax to companies backed by promoters with appropriate tax compliance records and to start up companies operating in the carbon mitigation space.
  • Decommissioning/rehabilitation costs: Introduce a tax relief for decommissioning/rehabilitation costs related to renewable projects.
  • Solar investment vehicle: Introduce a solar energy fund tax regime to encourage investment in solar energy and to reduce the cost barriers to entry.
  • Incentivising green spending and transition through measures such as super deduction of capital expenditure incurred; a qualified refundable tax credit with respect to such expenditure; super deduction or accelerated capital allowances; extension of BIK exemption for electric vehicles when the current scheme expires and reviewing the BIK treatment of shared cars provided by car sharing organisations.
  • Tax measures to facilitate transition from “brown” to “green” employment: For example, extend Tuition Fee relief for qualifying courses which will lead to upskilling of workers in areas related to decarbonisation.
  • Carbon credit: Allow a tax deduction for the cost of the carbon credits where whether the purchase was “wholly and exclusively for the purpose of the trade” (in line with US, UK and Australia).  

For further details and more recommendations please read the Carbon Conscious, Tax Advantageous: Incentivising Decarbonisation section of this submission or reach out to Cathal Noone

Among the measures we recommend supporting homegrown success are:

  • Capital Gains Tax (CGT) Retirement Relief: Extend the age limits and increase the thresholds. Stamp Duty: Introduce a Stamp Duty relief on the transfer of commercial properties to encourage lifetime transfers of business property to the next generation.
  • KEEP/SARP: Further enhancements to KEEP and SARP reliefs are needed to enable SMEs to attract and retain talent. 
  • Angel Investor Relief: Reduce the conditions to qualify and simplify the relief. 
  • Tax rate on certain dividends: Introduce a 20% income tax rate on dividends (with related Dividend Withholding Tax amendments), subject to a €100,000 per annum limit once the business has been in existence for five years.
  • Tapering Relief: CGT tapering relief should be introduced for individuals making certain investments.
  • Rollover Relief: 100% rollover relief should be provided for entrepreneurs that exit the business and who re-invest 75% or more of the sales proceeds in shares in another trading company, the disposal of which would be within the CGT charge.
  • Tax-Efficient Financing Arrangement: A loan finance arrangement should be commenced whereby individuals can lend money to SMEs and, provided certain safeguards are in place, for example, market interest rates are applied, then, the individual will be taxed on the coupon received at the standard rate of income tax (i.e., 20%) as opposed to the marginal rate of income tax (i.e., up to 55%).
  • Entrepreneur Relief: Review the lifetime limit and nature of Entrepreneur Relief.
  • Digitalisation: Introduce tax incentives and reliefs to support businesses in their digital transition and transformation.
  • Stamp Duty: Consideration should be given to reducing the stamp duty rate on share transactions in Ireland.

For further details and more recommendation, read the Irish Ingenuity, Global Opportunity: Tax Reform for Homegrown and International Success section of this submission or reach out to Fergal Cahill or Carmel Marnane.  

Our key recommendations to ensure that Ireland’s corporate tax policy provides for a future of success include:

  • Interest deductibility rules: Section 247 TCA 1997 should be repealed and replaced with new interest deductibility rules that are principle based.
  • Digitalisation tax credit: In alignment with the EU’s Digital Europe Programme, introduce a new qualifying refundable digitisation credit, which will be closely aligned to the existing R&D tax credit, but with a different science test.
  • R&D tax credit: Allow for related party expenditure where the Irish entity is the principal IP holder and is bearing all the economic risk and future benefits associated with the R&D spend.
  • R&D qualifying expenditure: Expand Qualifying R&D activities to include AI, blockchain, data analytics and carbon neutrality.
  • Enhanced R&D tax credit for safe AI expenditure: Introduce an enhanced R&D tax credit in excess of 30% (“qualified refundable tax credits” for Pillar Two) for certain categories of expenditure related to reliably safe development, implementation and use of AI. 
  • Expenditure on research and development: Amend the definition to include rental costs and other relevant overheads.
  • Digital Games Tax Credit: Increase the rate to 38% and make specific amendments to the legislation to ensure that the incentive is practically available to the way the digital gaming ecosystem works.
  • Knowledge Development box: Address the restriction on the regime by the Pillar Two rules and amend the regime to ignite the attractiveness of the incentive for qualifying companies. 

For further details and more recommendations, read the Innovate, Grow, Thrive: Redefining Corporate Tax for a Future of Success section of this submission or reach out to Louise Kelly or Cathal Noone.

Our key recommendations to reward workers include:

  • Rate bands: Increase the Standard Rate Cut off Point (“SRCOP”) from €42,000 to €50,000.
  • Higher tax rate: The top combined rate of 52%-55% should be reduced, which would include a reduction in the higher tax rate of 40%.
  • Special Assignee Relief Programme (SARP): Review and enhance the SARP regime.
  • Foreign Earnings Deduction (FED): Review and enhance FED (i.e., extending FED to all countries; extending the annual maximum relief to €100,000; removal of the sunset provision; extending the relief to USC/PRSI; extending it to the self-employed sector etc.).
  • Small benefit exemption: Remove the limit on the number of benefits and focus on the maximum value instead (€1,000 per year collectively).
  • Remote working reliefs: Extend the relief to a broader range of remote related costs, introduce a Remote Working Tax Credit; and recognise the home office as a place of work. 
  • Return to employment: Enhance existing measures to incentivise and encourage people to take up return to and remain in employment, with particular focus at individuals at risk of poverty.
  • PRSI/USC: Consider merging income tax and the USC.
  • Tax credits and reliefs: Reintroduce or enhance reliefs such as bin and service charges relief; travel and subsistence relief for temporary assignees; child services relief; child-related tax credits; health expenses and flexi TaxSaver commuter ticket scheme for all transport. 

For further details and more recommendations, read the Lifting the Burden, Fuelling Ambition: Personal Tax Reform to reward workers section of this submission or reach out to Ian Prenty or Kelly Payne.

Among our recommendations are five key proposals to deliver homes for people and businesses:

  • Real estate and housing roadmap: Consider developing a Roadmap on real estate and housing.
  • Landlords: Further reforms and the introduction of a standard tax rate for rental income. For all landlords, the rules for deductible expenditure should be aligned with the rules for trading profits.
  • Reducing tax input costs on residential property: Reduce the VAT rate and other tax input costs applicable in connection with residential development to address viability challenge. 
  • Tax incentives to re-purpose the property from non-residential to residential: Introduce a full refund from stamp duty where sites or developed property designated for non-residential use are subsequently repurposed and made available for residential use. Further tax incentives should be considered for developers or investors to stimulate this re-purposing on a timely basis to address the housing shortage.

For further details and other recommendations, please read the Sustainable Futures: Delivering homes for people and businesses section of this submission or reach out to Pádraig Cronin or Shane Wallace.

Our key recommendations include:

  • Future Ireland Fund and Infrastructure, Climate and Nature Fund: Policy should focus on growing these funds.
  • Investment products: Review the tax treatment and simplify into two categories; Investment Funds & Life Assurance based investment products and other investments including deposit interest.
  • Retail Investment: Introduce incentives for retail investments in domestic SMEs, startup, and scaling enterprises.

For further details and other recommendations, read the From Taxation to Transformation: Policies that Encourages Saving and Investment section of this submission or reach out to Matthew Dolan

Simplification of the tax system underlies all the comments and recommendations we make in this submission. In addition to the comments, we make elsewhere in this submission, we recommend that tax policy focuses on:

  • Double Tax Relief measures: Review and simplify Schedule 24 TCA 1997.
  • R&D administration: Introduce a pre-approval process for first time R&D tax credit claims.
  • Corporate tax administration: Review of the corporation tax return (Form CT1).
  • Tax legislation: Irish tax legislation should be reviewed with a view to simplification.

For further details and other recommendations, read the From Complexity to Clarity: simplifying the tax system section of this submission or reach out to Geraldine McCann

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