Irish Budget 2026 – Implications for Irish and International Investors

What You Need to Know

The Irish Budget for 2026 was announced by Minister Pascal Donohoe on 7 October 2025.

Budget 2026 delivers several important Irish tax changes, principally:

a) important tax measures intended to incentivise apartment development and construction;

b) reform of Ireland’s taxation of dividends and suggestions that further positive reforms will also emerge;

c) a broad new stamp duty exemption for Irish listed companies; and

d) a reduction in the rate of tax for Irish individuals investing in Irish and certain offshore funds from 41% to 38%.

Overall, Budget 2026 contained few adverse tax changes that impact business. However, there is likely to be some disappointment that many expected measures were deferred or will be subject to further consultation.

Real Estate

There is a series of measures aimed at the housing and construction sector. The VAT rate on the sale of new apartments reduces from 13.5% to 9%. This intervention is significant.

The provisions apply to all apartments that would otherwise have been subject to VAT on sale. The provisions apply to both individual sales and bulk sales. The measure is not limited to apartments that commence construction after Budget 2026.

Several technical aspects of the change will require clarification, such as the application to the co-living and student housing sectors. The measure is introduced through a financial resolution, which, assuming it is enacted in Finance Bill 2025, will have effect from 8 October 2025.

An enhanced corporation tax deduction equal to 125% of qualifying apartment construction costs is introduced. This is capped at €50,000 per unit. It is worth up to €6,250 in tax savings based on a tax rate of 12.5%. It is available for schemes of 10 or more apartment units, including conversions. It applies only if a commencement notice is filed on or after 8 October 2025 and before 31 December 2030.

The deduction is claimed on completion of the development. There is no apparent cap on this, meaning that in a case where 100 units are developed, the deduction could be worth €625,000.

A new exemption from corporation tax applies to rental profits from homes designated as Cost Rental. Cost Rental requires long‑term below‑market rents, among other eligibility and operational criteria. The exemption is intended to accelerate institutional delivery at affordable price points.

The Residential Development Stamp Duty Refund Scheme is extended for new commencements to 31 December 2030 and modernised to reflect current planning practice. There will be some disappointment that there was no change in the overall rate of stamp duty for commercial transactions.

For Residential Zoned Land Tax, there will be a further opportunity for landowners to seek rezoning changes on revised 2026 maps, and an exemption while planning appeals are underway.

A new national Derelict Property Tax will replace the Derelict Sites Levy. The new tax will be overseen by the Revenue Commissioners, rather than local authorities.

It will be legislated in 2026 with registers compiled in 2026–2027. The rate is expected to be at least 7% of the market value of the site.

The involvement of the Revenue Commissioners will be expected to increase the level of tax raised.

No changes were announced to the Irish Real Estate Fund (IREF) rules, which apply to Irish regulated property funds. There had been suggestions that the IREF regime would be overhauled. Instead, the Minister suggested some improvements and reforms to simplify the regime would be introduced. This will be welcomed by investors who continue to grapple with this very complex regime.

Corporation Tax and International Business

Ireland introduced a participation exemption for foreign dividends in 2025. This is being extended to jurisdictions beyond EU/EEA and treaty partners to include jurisdictions operating a non‑refundable dividend withholding tax, subject to conditions. It will also reduce from five to three years the period for which paying companies must have been resident in a qualifying jurisdiction.

From 2026, the R&D credit rises from 30% to 35%. In other words, companies can claim a refund of €35 for every €100 spent on qualifying research and development activities. The first‑year payment threshold increases to €87,500 and a simplification allows 100% of an employee’s emoluments as qualifying where at least 95% of time is on qualifying R&D.

The Minister acknowledged that the R&D Credit continues to be “a key driver of economic growth and high value employment” in Ireland

The Government has also committed to publishing a plan in the coming weeks that will consider additional targeted changes to the R&D Credit, notably in the areas of outsourcing and the definition of qualifying expenditure.

The Film Tax Credit will be enhanced to a 40% rate for productions with at least €1 million of eligible expenditure. The enhanced rate will apply to eligible spend of up to €10 million per production. The Digital Games Tax Credit is extended to 31 December 2031 and will be expanded to include qualifying post‑release content for up to three years post‑launch. Each of these measures is subject to EU approval. A technical amendment will be made to legislation in respect of the calculation of available balancing allowances on costs incurred on intellectual property (IP) in an accounting period.

This appears to have been motivated by concerns that taxpayers could claim relief on the disposal of IP that would not be subject to the usual 80% restriction under the IP tax depreciation regime.

The amendment will extend the restriction that currently applies to IP capital allowances that limit the allowable deductions in a period to 80% of relevant trading income. The amendment is introduced through a financial resolution that will be enacted in Finance Bill 2025 and will have effect from 8 October 2025.

The anticipated changes to dividend withholding tax intended to promote Ireland as an investment platform remain under review. It is hoped that these changes will be included in Finance Bill 2025.

The budget speech reaffirmed Ireland’s commitment to the OECD’s 15% global minimum tax for large multinational groups. There were no changes proposed in Budget 2026, and there was an emphasis on Ireland’s desire to implement the rules in line with evolving OECD guidance and EU requirements.

The Minister announced several consultations that will be of interest to business. There will be a comprehensive review of Irish withholding taxes. This was expected and will be a joint consultation run by the Department of Finance and Revenue Commissioners.

The Department of Finance also released an action plan for the next stage of its comprehensive review of the taxation of interest.

Investment Funds and Financial Services

Finance Bill 2025 will reduce the rate of Investment Undertaking Tax for Irish‑domiciled funds from 41% to 38%. This was anticipated and will apply to Irish regulated funds, life assurance taxes and certain offshore funds.

The Department of Finance has published a status update on the Funds 2030 Review recommendations. Several matters remain under consideration. These include removal of deemed disposal rules, measures to incentivise private asset investment funds in Ireland and simplification of the offshore fund rules.

The Government intends to publish a roadmap to simplify and adapt the tax framework to encourage retail participation, taking account of EU Savings and Investments Union recommendations, including investment accounts (such as an Irish ISA).

The bank levy is extended for 2026 with an unchanged €200 million target yield and apportionment by the 2024 deposit base.

SMEs and Investment

A new exemption from 1% stamp duty applies to acquisitions of shares in Irish companies listed on regulated or qualifying markets with a market capitalisation below €1 billion until 31 December 2030.

The existing Euronext Growth exemption will be withdrawn. The stamp duty rate has been previously cited as a disincentive for the use Irish registered companies for new flotations and it is hoped this move will encourage future Irish listings.

The lifetime limit on entrepreneur relief from CGT for gains taxed at 10% increases to €1.5 million from 1 January 2026. The timing is obviously significant, as it may lead to some transactions being deferred to take account of the new extended relief.

The Key Employee Engagement Programme, a share option scheme, is extended to 31 December 2028, subject to EU approval.

The Special Assignee Relief Programme is extended to 31 December 2030. For new entrants from 1 January 2026, a minimum annualised base salary of €125,000 will be required, and 30% of relevant income between €125,000 and €1 million will qualify for relief. Existing claimants are not affected by this change.

The Foreign Earnings Deduction is also extended to 31 December 2030, with the cap increased to €50,000 and the list of qualifying countries expanded to include the Philippines and Türkiye.

Climate Change and Energy

The carbon tax will increase as scheduled to €71 per tonne of CO2 from 8 October 2025 for propellant fuels and from 1 May 2026 for other fuels. Vehicle Registration Tax relief for electric vehicles is extended to 31 December 2026 and there will be changes to the Benefit‑in‑Kind on certain vehicles including electric vehicles. There was an extension to the capital allowance provisions for energy efficient equipment.

VAT for Hospitality Sector

The VAT rate for food and catering will be reduced from 13.5% to 9% with effect from 1 July 2026. This was widely expected and illustrates the importance of this sector to the Irish economy.

Income Tax, Social Insurance and Universal Social Charge (USC)

There were minimal changes to income tax bands. The ceiling for the 2% rate of USC increases to €28,700 to ensure minimum wage earners remain outside higher USC rates. The social insurance (PRSI) increases that were already scheduled to proceed since last year will go ahead as planned. The standard employee PRSI rate rises from 4.1% to 4.2% from 1 October 2025 and to 4.35% from 1 October 2026.

The Rent Tax Credit is extended to 31 December 2028 with a maximum of €1,000 for single claimants and €2,000 for jointly assessed couples from 2026.

Mortgage Interest Tax Relief is extended on a tapered basis to 31 December 2026.

Compliance

Budget 2026 contained an indication that the Revenue Commissioners will increase their compliance interventions. Budget 2026 materials note that Revenue will conduct a range of targeted compliance management activities in 2026. The expected yield from this is €50m, indicating that there could be a material series of investigations and audits.

Timing, Enactment and Actions

Most measures will be legislated in Finance Bill 2025, with certain items effective from 8 October 2025 or with specified 2026 commencement dates. Some changes, particularly in the audiovisual and games sectors and within the funds space, are subject to EU approval and commencement orders. The interest taxation reform process will proceed through 2026 with phase one legislation earmarked for Finance Bill 2026.

We recommend that all clients closely monitor the developments, including the provisions in Finance Bill 2025 and consider potential impacts on their operations.

Our team at Maples and Calder’s Dublin office is available to provide detailed advice and support.

Further Information

For further information, please liaise with your usual Maples Group contact or any of the persons listed on this page.