Ireland Budget 2026 – Tax highlights

Oct 7, 2025

Shades of blue —light, medium, and dark—displayed curves and waves

The first Budget of the new Government's term, Ireland's Budget 2026 sets out a €9.4bn package focused on resilience, investment and fiscal discipline. It aims to protect jobs, support growth and strengthen public finances amid global uncertainty. A €275bn capital plan is proposed to support housing and infrastructure, while surpluses and long-term savings funds are also central to the Government’s strategy to safeguard the economy against future shocks.

In terms of tax measures, key areas of focus are housing, measures to support households, promoting investment and a supportive business environment, and financial services, particularly in the context of encouraging retail investment.

Below, we outline the key tax measures and budget highlights relevant to the international business community.

Financial services

In response to a public consultation on the tax treatment of interest concluded earlier this year, the Minister for Finance has published an Action Plan for reform of Ireland's taxation regime for interest. The plan sets out a phased approach to reform, with phase one prioritising proposals forming the basis of the underlying framework for the taxation and deductibility of interest. These include aligning the tax treatment between trading and passive interest income for income tax and corporation tax purposes, introducing a renewed and simplified test for the deductibility of interest and widening the scope of interest deductibility to include amounts economically equivalent to interest. A Feedback Statement of reform is to be published in November 2025 to invite further consultation, with changes anticipated to be included in Finance Bill 2026. Other areas identified in the Action Plan for potential reform under future phases include, among others, specific rules relating to financial services transactions including Section 110 and Islamic financing transactions, interest deductibility rules relating to Irish rental income and for capital gains tax purposes, and withholding tax provisions.
A participation exemption for foreign dividends paid by subsidiaries resident in an EU / EEA and double tax treaty jurisdictions was introduced last year in order to simplify double tax relief and enhance Ireland’s competitiveness for multinational businesses. The geographic scope of the exemption will be expanded in Finance Bill 2025 to include jurisdictions where non-refundable withholding taxes apply. In addition, the time period during which companies must have been resident in an in-scope jurisdiction will be reduced from 5 to 3 years. A number of technical amendments to improve the operation of the relief will also be introduced. These measures should further enhance Ireland's holding company regime and support investment in private assets.
An exemption from the 1% stamp duty charge applicable to acquisitions of shares in certain Irish registered companies will be introduced. The exemption will apply to the shares of a company admitted to trading on a regulated market, a multi-lateral trading facility, or an equivalent third country market, and which has a market capitalisation of less than €1bn.
The Minister for Finance announced that a joint Department of Finance and Irish Revenue public consultation on withholding taxes is expected to be launched soon.
The Bank Levy will be extended for a further year to the end of 2026, with a target yield of €200m.

Investment funds

An Implementation Plan for the Funds Sector 2030 Report was published today in line with a commitment in the Programme for Government. Published in October 2024, the Funds Sector 2030 Report contained 42 recommendations which focused on enhancing Ireland’s leading role as a domicile for ETF and MMFs and targeted measures to support further growth in private assets, primarily through regulated structures. The Implementation Plan provides a status update on the recommendations, noting that 30 of the 42 recommendations are either complete, on a path to completion or progressing, including completion of substantive recommendations on ETFs and the AIF Rulebook, both by the Central Bank of Ireland, while 12 recommendations remain under consideration. A Roadmap is being developed for publication in early 2026 to set out a proposed approach to simplify and adapt the tax framework to encourage retail investment and will take into account the European Commission’s September 2025 recommendation on Savings and Investment Accounts.
In a welcome move for retail investors, the tax rate that applies to investments in Irish domiciled funds (ICAVs, ETFs, authorised investment companies and unit trusts) will be reduced from 41% to 38%. The reduced rate of tax will also apply to Irish life assurance policies, certain foreign life assurance policies and investments in offshore funds which are considered equivalent to Irish domiciled funds.
The Funds Review recommendation to consult on an entity-level tax for IREFs (Irish Real Estate Funds) will not be progressed; instead proposals to simplify the regime will be published for consultation in due course, with a view to amendments being made in Finance Act 2026.
The Funds Sector 2030 Report also recommended that a package of measures should be introduced to improve the attractiveness of the Irish Investment Limited Partnership ("ILP") structure, including how the participation exemption in respect of foreign dividends could support the use of ILPs and a review of the scope of the dividend withholding tax ("DWT") exemption generally. The Implementation Plan published today notes that the participation exemption for foreign dividends was introduced in Finance Act 2024 (with further changes announced by the Minister for Finance today), and that the scope of the Irish DWT exemption remains under consideration – which, if amended, should help support Ireland's growing private assets regime. Further detail is awaited.

Business / FDI measures

The Research and Development (R&D) tax credit provides a tax credit for qualifying R&D expenditure. The R&D tax credit will be increased from 30% to 35%. The first-year payment threshold, which allows for a capped claim to be paid in full in year one rather than over three years in order to assist with cashflow, will be increased to €87,500. An R&D compass will also be published in the coming weeks to consider targeted changes to the R&D tax credit to better align with industry practices, such as in the areas of outsourcing and qualifying expenditure definitions, and will also set pathway for development of innovation supports.
The existing Capital Gains Tax (CGT) Entrepreneur Relief, which gives a reduced CGT rate of 10% on gains from the disposal of certain business assets, is currently subject to a lifetime limit of €1m of gains to which the relief applies. The cap will be increased to €1.5m for disposals from 1 January 2026.
KEEP (Key Employee Engagement Programme) is a tax efficient share option scheme available to SMEs. The regime was due to expire at the end of 2025 but will be extended until the end of 2028 (subject to European Commission approval).
The SARP (Special Assignee Relief Programme), which provides income tax relief for employees assigned to work in Ireland, will be extended for 5 years to 2030 and the minimum income to qualify for the relief will be increased to €125,000. A detailed review document in respect of the SARP regime was also published which contains recommendations to make the administrative requirements more practical. Administrative simplifications will be introduced in Finance Bill 2025.
The Foreign earnings deduction (FED) incentives for employees of Irish firms exploring new markets to be extended for 5 years to 2030, and the maximum amount of relevant employment income that may qualify for Income Tax relief will increase from €35,000 to €50,000. The relief will be extended to apply in respect of qualifying time spent working in two additional countries: the Philippines and Türkiye.
Following recently agreed changes to EU VAT law, the modernisation of VAT administration will continue, and the Irish Revenue Commissioners will begin a phased roll-out of domestic business to business electronic invoicing. Irish Revenue are to publish a paper with further details tomorrow.

Housing

The Minister acknowledged that "increasing supply is key" to alleviate pressures on the housing market. Several targeted measures will be introduced to help stimulate residential development, along with a commitment of over €5bn in capital investment for housing delivery over the next year, including €200m of additional external funding for Home Building Finance Ireland, which provides finance to homebuilders across the country.
The most significant measure announced to support additional supply is the reduction in the VAT rate on the sale of completed apartments from 13.5% to 9% effective from 8 October 2025 to 31 December 2030.
A Corporation Tax exemption is being introduced in respect of profits associated with income from the Cost Rental Scheme. This exemption is being introduced to help accelerate the delivery of affordable homes and it will apply in respect of properties designated as Cost Rental from 8 October 2025.
An enhanced Corporation Tax deduction is being introduced for qualifying apartment construction costs, including costs involved in the conversion of non-residential buildings into apartments. The measure will allow an increase of 125% in the qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit.
The Residential Development Stamp Duty Refund Scheme is being extended to 31 December 2030, along with the introduction of certain enhancements to the regime to bring it more into line with current planning and development practices. This scheme provides for a partial repayment of the Stamp Duty paid on the acquisition of land where the land is subsequently developed for residential purposes, subject to conditions.
As further support to the housing market, various income tax reliefs and credits are to be increased and/or extended to support renters, homeowners and landlords.
A further opportunity is being provided for Residential Zoned Land Tax (RZLT) landowners to make a submission requesting a change in the zoning of land, and, in certain circumstances, being exempted from RZLT for 2026 on foot of such submissions.
The Living City Initiative, which supports enhancement of older housing and commercial properties in certain designated areas, is being expanded and extended.
A new Derelict Property Tax has been announced, which will be collected by the Revenue Commissioners and will replace the existing Derelict Sites Levy. The objective of this tax is to incentivise owners of derelict properties to take action in relation to bringing them back into use and it is envisaged that the tax rate will not be lower than the current 7% rate.