Ireland Budget 2026: driving enterprise policies and future outlook

The Irish government’s proposed Budget for 2026 centres on forward-looking economic measures, with a particular emphasis on policies intended to support and attract foreign direct investment to Ireland.

Given the uncertain geopolitical backdrop, Budget 2026 supports the Irish economy, protecting jobs, and incentivising indigenous job creation. There is also a clear focus in supporting foreign direct investment, driving economic growth, with significant capital expenditure for much needed infrastructure.

Several measures aimed at supporting job security and stability have been introduced ahead of the Finance Bill 2025, which is expected to be published on Thursday 16 October 2025. This bill will detail measures affecting businesses and investors.

Key highlights of Budget 2026

Corporate

Research and development (R&D) credit

The research and development (R&D) tax credit will rise to 35%, an increase of 5%. This demonstrates Ireland's commitment to retaining existing investment in R&D and to winning the next wave of foreign direct investment.

The Minister for Finance Paschal Donohue also announced an increase in the first-year payment threshold from €75,000 to €87,500 to further assist the small medium enterprise sector.

The publication of an R&D compass in the coming weeks will consider targeted changes (e.g., outsourcing and qualifying expenditure definitions) and will set a pathway for the support of innovation in Ireland. This will encourage the retention of existing R&D projects and help win new foreign direct investment.

Participation exemption for foreign dividends

The Finance Bill 2025 will broaden the geographic scope of the dividend participation exemption to include qualifying dividends received from jurisdictions that apply a non-refundable dividend withholding tax. Some technical amendments will also improve the operation of the relief, including confirmation that a shareholding should not be considered a "business" for the purposes of the provisions.

Audiovisual sector and digital games relief

The Section 481 Film Tax Credit has been enhanced to 40% for productions with eligible expenditure of a minimum value of €1 million up to a maximum of €10 million per production. Currently, the Film Tax Credit provides a 32% credit on qualifying expenditure of up to €125 million on certain productions. The changes are subject to EU State Aid approval.

The Digital Games credit provides a 32% credit on qualifying expenditure up to €25 million. This credit, which was due to expire in 2025, will be extended for six years to 31 December 2031. This is also subject to EU State Aid approval.

Entrepreneur relief

Increases to the overall lifetime limit available on gains that qualify for the revised Entrepreneur Relief, which provides a capital gains tax rate of 10% on qualifying investments. This will apply in respect of qualifying disposals made on or after 1 January 2026 and sees the limit increase from €1 million to €1.5 million.

Accelerated capital allowances

There has been an extension to the accelerated capital allowances schemes for energy efficient equipment until 31 December 2030. This allows for 100% year-one capital allowances for business expenditure incurred on certain energy efficient equipment.

VAT on hospitality

A reduced 9% VAT rate for food and catering businesses, as well as hairdressing services. However, the reduction will not come into effect until 1 July 2026.

VAT invoicing

As part of the wider EU "VAT in the Digital Age" agenda, the Revenue Commissioners will begin a phased roll-out of domestic electronic invoicing arrangements for business-to-business transactions. Further details will be published shortly.

Real estate

Reduction in VAT

The VAT rate on the sale of completed apartments is to reduce from 13.5% to 9%, effective from 8 October 2025 until 31 December 2030.

Enhanced corporation tax deduction

A new enhanced corporation tax deduction for qualifying apartment construction costs will allow a deduction of 125% of qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit. The deduction will be available for projects comprising 10 or more apartments and will be available for both new-build developments and for conversion projects.

Corporation tax exemption for Cost Rental Schemes

There will be an exemption  from corporation tax for rental income arising from properties in the Cost Rental Scheme, effective from 8 October 2025. The exemption applies for homes that are designated as Cost Rental Scheme properties by the Minster for Housing, Local Government and Heritage .

Conversion of non-residential premises to residential: supports and tax reliefs

New reliefs to facilitate conversion of vacant or underused non-residential premises to residential use were announced, with details to follow.

Stamp duty rebate scheme changes: multi-phased developments

The Residential Development Stamp Duty Refund Scheme is extended to the end of 2030, with notable improvements. For large-scale and multi-phase residential developments, a full refund can now be claimed at the commencement of the first phase, improving cash flow for developers.

Time limits for the scheme (acquisition-to-commencement and commencement-to-completion) are extended from 30 to 36 months, providing increased flexibility to complete development phases.

Second-hand and regeneration initiatives

The Living City Initiative and related policies aim to bring idle or underutilised housing stock back into productive use, particularly in urban centres and designated regeneration areas. The tax incentive for refurbishing buildings in special regeneration areas in certain Irish cities now extends to properties built before 1975 with the addition of certain other regional centres. Previously this was limited to properties built before 1915, so the scope of properties eligible for the initiative is substantial. The scheme is extended to 2030, with increased relief caps from €200,000 to €300,000 for enterprises, and greater flexibility in the claim time frame.

Derelict Property Tax (DPT)

A new DPT will replace the existing Derelict Sites Levy, which will be administered by Revenue based on registers maintained by local authorities. Local authorities will begin the process of identifying derelict properties in 2026, with a preliminary register expected to be published in 2027.

The tax is anticipated to come into effect in 2027. The Irish Minister for Finance indicated that the rate of the tax will not be lower than the current 7% levy applied to the market value of derelict sites. The new tax will be legislated for in Finance Bill 2026.

Employment 

Special Assignee Relief Programme (SARP)

The SARP is an income tax exemption for assignees to Ireland of 30% of relevant employment income between €100,000 and €1 million, subject to conditions. It has been extended for a further five years, with an increase to the minimum income threshold to €125,000 from 2026.

Foreign Earnings Deduction (FED)

The FED is an income tax relief that applies to employment income of Irish residents working in certain countries while exploring new export markets, subject to conditions. The relief has been increased to €50,000 from 2026 and extended for a further five years. The scope has also been broadened to include the Philippines and Turkey.

Key Employee Engagement Programme (KEEP)

This programme was due to expire at the end of 2025, but following engagement with stakeholders, is to be extended until the end of 2028, subject to EU approval. The Finance Bill 2025 in Ireland will provide for an extension of the exemption which applies to the exercise of qualifying share options. 

Investment funds

Taxation of investments

The Minister for Finance announced a reduction in the rate of taxation from 41% to 38% (exit tax) that applies to investments in certain Irish domiciled funds (including ICAVs), certain life assurance policies, equivalent offshore funds, and certain foreign life assurance policies. There was no announcement or movement regarding the rules concerning deemed disposal of funds after eight years.

The Irish government  will publish a roadmap early next year setting out an intended approach to improve retail participation in investment funds, considering the European Commission's Savings and Investments Union proposal for the introduction of tax-efficient investment accounts. You can read the European Commission's proposal here.

Banking and finance

Tax treatment of interest

Minister for Finance Paschal Donohue published an action plan for the reform of Ireland's taxation regime for interest to ensure that Ireland's tax code is attractive to investment and is aligned with international best practice. A feedback statement will be issued in November 2025 to invite further consultation, with changes anticipated to be made in next year’s Finance Bill 2026.

The feedback statement will look at areas of specific interest for financial services including Section 110 companies, Islamic compliant financing, the Irish rental sector and withholding tax provisions. A public consultation on withholding taxes will be  launched separately.

Bank levy

The bank levy will be extended for a further year with a target yield of €200 million. Previously, the levy was based on deposits at the four liable financial institutions at the end of 2022. It will now be based on deposits in 2024.

Withholding taxes

A joint Department of Finance and Revenue public consultation on withholding taxes is expected to be launched shortly. The Government wishes to explore opportunities to modernise, digitise and further expand the scope of withholding taxes. No details were outlined in the announcement.

How Ogier can help

Ogier's Tax experts work alongside our banking and finance, corporate, employment and funds experts to advise clients across sectors on matters including tax advisory and compliance requirements. For further information on Ireland’s Budget 2026 announcement and the Finance Bill 2025, contact Ogier Ireland's Tax team.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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