Participation Exemption
In order to reduce the complexity associated with the existing tax and credit regime for foreign source dividends, a new participation exemption for foreign source dividends came into effect from 1 January 2025. The exemption applies to relevant distributions received from relevant subsidiaries that are resident in EU/EEA and tax treaty jurisdictions. The method of claiming double taxation relief should continue to be available for dividends received from non-qualifying jurisdictions.
A company may choose annually whether to claim the exemption. Where the exemption is claimed, it will apply to all qualifying dividends received in that period. Where the exemption is not claimed, the existing method of claiming double taxation relief should apply.
The Minister noted his intention to simplify double tax relief under this exemption to improve the operation of the relief and to extend the geographical scope of the exemption to include jurisdictions where non-refundable withholding taxes apply.
Withholding taxes
The Minister highlighted the importance of withholding taxes to our tax system and stated his intention to modernise, digitalise and further expand the scope of withholding taxes.
Capital allowances on intangible assets (S291A)
Capital allowances are available for costs incurred on intellectual property (IP), and intangible assets acquired for the purpose of the trade. Capital allowances are ringfenced to 80% of the relevant trading profits in that accounting period. Companies are allowed to carry forward unused capital allowances into future periods. The carry forward amount will be subject to the ring-fence and cap in the relevant periods.
A technical amendment is being made as to how the balancing allowances, which arise on certain events can be used. This amendment will come into immediate effect as of 08 October 2025.
Reform of Interest Deductibility Rules
In conjunction with the Budget announcements an Action Plan to reform Ireland’s tax regime for interest was published today by the-Department of Finance. The Minister acknowledged that in order to remain competitive, Ireland’s tax code should be attractive to investment and aligned with international best practice.
Following an extensive consultation on the tax treatment of interest in Ireland, a resounding call for fundamental reform of the underlying framework for the taxation and deductibility of interest was paramount. The Action Plan has been devised as result of the responses received to the consultation, and will progress reforms to achieve a simplified regime.
The Action Plan states that a feedback statement will be published in November and further consultation will be carried out over the course of the next year with a view to include relevant amending legislation in Finance Bill 2026.
Funds Sector
A reduction of the tax rate that applies to Irish and equivalent offshore funds and foreign life assurance products from 41% to 38% was also announced in an effort to encourage retail investment.
Following the Funds Sector 2030 Report, a roadmap will be published early in 2026 which will set out the intended approach to simplify and adapt the tax framework to further encourage retail investment.
An Implementation Plan for the overall Funds Sector 2030 Report is also being published today.
The Minister indicated that although the Funds Sector 2030 Report recommended a public consultation on potential options for an entity level tax for IREFs, that recommendation would not be progressed. However, the Department of Finance will undertake a public consultation on proposals to simplify the IREF regime without limiting its effectiveness.
Stamp duty measure for Irish SMEs and start-ups trading on regulated markets
A new market cap exemption Stamp Duty threshold of €1 billion for Irish SMEs and start-ups trading on regulated markets has been proposed as an attempt to support capital markets. For companies below the €1 billion threshold, the 1% Stamp Duty charge ordinarily paid on share transactions will not apply. The Minister highlighted that this measure aims to assist the growth of homegrown businesses, especially those aiming to expand internationally.
Bank Levy
The bank levy which was introduced in 2024 (and applies to those banks that received financial assistance from the State during the banking crisis) is being extended for a further year with a revenue target yield of €200 million.
R&D Tax Credit Regime
The Minister announced a welcomed increase of the R&D tax credit rate from 30% to 35% which will be a. Also announced was the increase of the year one refundable R&D tax credit from €75,000 to €87,500 or 50% the value of the credit if higher to support smaller R&D projects.
Where an R&D employee has spent 95% of their time on qualifying R&D activities, 100% of that R&D employee’s emoluments will be allowed as an administrative simplification measure.
In addition an R&D compass will be published in the coming weeks that will consider targeted changes to the R&D tax credit to better align with industry practices, in areas such as outsourcing and qualifying expenditure definitions.
Digital Games Tax Credit
The sunset date for the Digital Games Tax Credit has been extended by six years from 31 December 2025 to 31 December 2031. To align with digital games development practices, the credit has been extended to allow for claims in respect of post-release content work subject to certain conditions.
Film Tax Credit
The Film Tax Credit is being amended to reflect a new 40% rate for productions with a minimum of €1
million of eligible expenditure on relevant Visual Effects expenditure up to a maximum of €10 million per production.
These amendments to the Digital Games and Film Tax Credits are both subject to a commencement order, pending approval from the European Commission.
Carbon Tax
Carbon Tax continues to follow the trajectory set out in the Finance Act of 2020.
Carbon Tax increases to €71 per tonne of CO2. Additional revenue arising from this is estimated at
€121m in 2026 and the full year additional yield is estimated at €157m.
This revenue will be spent on social welfare measures and other measures to prevent fuel poverty and to ensure a just transition; a socially progressive national retrofitting programme, and funding to encourage and incentivise farmers to farm in a greener and more sustainable way e.g. this year, the allocation for the Warmer Homes Scheme, which provides completely funded retrofits to low-income households, has seen an 11-fold increase relative to 2020 expenditure.
€558 million in carbon tax revenue allocated for residential and community energy upgrade schemes.
Capital Gains Tax
The rate of Capital Gains Tax remains unchanged at 33%.
The lifetime limit of €1m of capital gains which qualifies for the reduced Capital Gains Tax rate of 10% has been increased to €1.5m. The increased limit applies to disposals on or after 1 January 2026.
Capital Acquisitions Tax
The rate of Capital Acquisitions Tax remains unchanged at 33%.
Disappointingly, the Group CAT Thresholds also remained unchanged:
