Budget 2027 - Business Tax

Preliminary Corporation Tax

Whilst there are no changes to the current rates of Corporation Tax there will be changes to the preliminary corporation tax rules to reduce uncertainty, improve flexibility and reduce the administrative burden for companies.

Whilst it would appear that we will have to wait for the upcoming Finance (No 2) Bill 2026 for full particulars the Minister did indicate that the changes will include

• the threshold up to which a company is considered to be a “small company” for the purposes the purposes of preliminary tax payments will increase from €200,000 to €350,000.
• an extension to the current limited top-up mechanism, to provide that preliminary tax requirements are satisfied where at least 80% of the current year liability has been paid by the final preliminary tax instalment date and a top-up payment to reach 100% of the liability is made within four months of the end of the accounting period.
• removal of a 45% deeming provision, such that an underpayment of the second instalment of preliminary tax does not result in a deemed underpayment of the first instalment, where the first instalment payment was not of an amount at least equal to 50% of the prior year liability

Start-Up Company Relief

The Minister announced an extension of relief under Section 486C TCA 1997 for qualifying start-up companies until 31 December 2030.

The relief continues to provide an exemption from corporation tax for qualifying start-up companies during their early years of trading, subject to certain conditions.

Withholding taxes

Professional Services Withholding Tax is being updated with the introduction of differing “Personal Deduction Rates” to replace the current flat rate of 20%.

In addition, self-employed taxpayers will be able to opt-in for the real time exchange of information with Revenue, to ease their administrative burden.

These changes are subject to Commencement Order.

Reform of Interest Deductibility Rules

Following on from last year’s Budget speech, and the publication of the Action Plan to reform Ireland’s tax regime for interest, the Minister confirmed that there will be several targeted amendments in this year’s Finance (No 2) Bill 2026 to simplify the existing provisions governing interest relief on borrowings taken out for certain lending and investment activities.

Funds Sector

The tax rate applying to Irish investment undertakings, equivalent offshore funds, and certain Irish and foreign life assurance products is reduced from 38% to 35%, with effect from 1 January 2027.

Minister Harris also flagged this as an area for further work, including on the rate of taxation, deemed disposal rules, and lowering the administrative burden facing investors.

Whilst this announcement is welcome, taxation on these asset classes remains stubbornly higher than on those assets which are taxable under the CGT (now 31%) or DIRT (33%) regimes. Furthermore, both the 8-year deemed disposal rule on investment undertakings, and the 1% government levy on life assurance premiums, remain.

Under the deemed disposal rule, an investor is ‘deemed’ to have sold their holding every 8 years. Any ‘gains’ on the deemed disposal taxable, albeit the investor may not have received any actual proceeds. The removal of this rule would encourage long-term investment in Irish-domiciled funds.

International Tax – Pillar Two

A number of changes are being made to Ireland’s Pillar Two legislation following the agreement of the OECD Side-by-Side Package in January 2026. Ireland is required to implement the agreement within specific timeframes in order to satisfy the OECD peer review process. The agreement provides for the following safe harbours:

• extension of the existing Transitional Country-by-Country Reporting Safe Harbour,
• the Simplified Effective Tax Rate Safe Harbour,
• the Substance-based Tax Incentive Safe Harbour,
• the Ultimate Parent Entity Safe Harbour, and
• the Side-by-Side Safe Harbour.

Amendments are also being made to reflect further agreed Administrative Guidance published by the OECD in May and September 2026, and to update Pillar Two rules in relation to penalty and filing provisions.

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 R&D tax credit currently provides a 35% tax credit for qualifying expenditure in the carrying on research and development activities.

Following the review of the R&D Tax Credit undertaken last year a number of enhancements to the R&D tax credit were announced

• The existing subcontracting limits relating to both universities / institutes of higher education and unconnected third parties are being increased to 20% and €200,000.
• This first-year payment threshold is being increased from €87,500 to €105,000 to provide a cash-flow benefit for smaller R&D projects and encourage more companies to engage with the regime. This means that the first €105,000 of a claim will be payable in full in the first year, rather than over the standard three annual instalments.
• A change is being made to improve the recognition of the R&D tax credit for the purposes of preliminary corporation tax. This will provide a cashflow benefit to companies where the credit is offset against tax liabilities.
• A new provision is being introduced which will allow claimant companies to increase their qualifying cost base by 5% of qualifying R&D wage costs, subject to the company having incurred a sufficient level of expenditure.
• An amendment is being introduced to provide that if a clinical trial is regulated, this fact may be used to satisfy the science test, to recognise R&D work undertaken by Irish companies as part of global trials and to reduce administrative burden. It is noted that this measure will be provided for at Committee Stage of Finance Bill (No 2) 2026 as technical work is ongoing on development of the relevant legislation.

Knowledge Development Box

Knowledge Development Box (KDB) relief is to be extended to 1 January 2032 with an option for existing claimant companies to elect out of the KDB regime. The option to opt out of the regime will be available for a limited time subject to specific conditions being met.

Carbon Tax

The Minister stated that Carbon Tax continues to fundamental part of Ireland’s response to the energy transition.

However given the current environment where energy costs are rising at unprecedented rates the Minister announced a number of measures to ease the cost in doing business, and the cost of living.

Carbon taxes on auto fuels currently due to increase on 14 October 2026 to €78.50 per tonne of CO2 emitted will be deferred to 1 May 2027. A further increase will take place on 13 October 2027 whereby these fuels will be back on the trajectory to €100 per tonne of CO2 as set out in Finance Act 2020.

Carbon taxes on kerosene and on natural gas will be reduced to €48.50 t/CO2 emitted until 2030.

The scheduled increase of carbon tax on Marked Gas Oil (MGO) originally for 1 May 2026 will be deferred to 1 May 2027. The scheduled increase for 1 May 2027 will be deferred until 13 October 2027.

For the more minor fuels (including solid fuels), where those fuels’ carbon tax increases were first deferred on 1 May 2026, there will be a double increase in the rate on 1 May 2027 such that the rate increases from €63.50 per tonne of CO2 to €78.50 per tonne of CO2; where those fuels’ carbon tax increases were scheduled to take place on 14 October 2026, this increase will be deferred until 1 May 2027, with a further increase scheduled for 13 October 2027.

Irish Property Related Measures

The Minister today announced a number of tax measures affecting the Irish property and housing market, including changes to Residential Zoned Land Tax, the introduction of the new Derelict Property Tax and increased supports for home buyers and renters.

Residential Zoned Land Tax

Residential Zoned Land Tax (RZLT) is an annual tax applying to certain land which is zoned for residential development and serviced, but which has not been developed for housing. The tax is charged at 3% of the market value of land within the scope of the regime.

The Minister today announced a further opportunity for landowners to seek a change in zoning for land appearing on the revised RZLT map for 2027. In certain circumstances, landowners who make such a submission may also qualify for an exemption from RZLT for 2027. Further details will be contained in Finance (No. 2) Bill 2026.

Derelict Property Tax

The introduction of a new Derelict Property Tax (“DPT”) was first announced as part of Budget 2026, with the new tax intended to support the regeneration and return to use of derelict properties. DPT will replace the existing Derelict Sites Levy and will be administered by the Revenue Commissioners, based on registers of derelict properties maintained by Local Authorities.

The Minister today provided further detail on the operation of the new tax. DPT will apply to both residential and non-residential properties included on the relevant Local Authority register and will be charged annually at a rate of 7% of the self-assessed value of the property. Limited provision will be made to allow the tax to be deferred or abated where appropriate steps are taken to remediate a property within a reasonable timeframe.

Local Authorities will begin identifying properties during 2027, with preliminary registers to be published on 1 September 2027. The first DPT pay and file deadline will be 23 June 2028. The tax will initially apply in towns and cities with populations of 4,000 or more, before being extended to towns with populations of 2,000 or more in the following year. Further details will be set out in Finance (No. 2) Bill 2026.

Help to Buy

The Help to Buy scheme provides tax relief to first-time purchasers of qualifying newly built homes. Relief is currently based on the lower of a prescribed maximum amount, 10% of the purchase price of the property or the amount of Income Tax and DIRT paid by the purchaser in the previous four years.

The Minister announced an increase in the maximum relief available under the scheme from €30,000 to €35,000, with effect from 7 October 2026. The other parameters of the scheme remain unchanged.

Enhanced Reporting Requirements

With effect from 1 January 2027, employers will have a choice to either continue reporting relevant tax-free payments on or before the payment date, or report by the 14th of the month following the income-tax month in which the reportable benefit is provided.

The scope of benefits that need to be reported under the Enhanced Reporting Requirements regime remains unchanged