Savings and Investment Account
Readers will be all to aware of the Government’s intention to introduce a new Savings and Investment Account. In late August, the Government published a Roadmap for the Taxation of Retail Investment, which included some key features of the new Investment Account, while reserving on some of the key details regarding tax-free thresholds and the tax rate to apply above same. Today, we received that further detail.
The Investment Account will be subject to a tax-free threshold of €50,000, with a flat tax of 1% on the value of the account above that threshold, and a maximum contribution limit of €12,000 per annum and no minimum contribution.
The contribution limit of €12,000 in combination with the tax-free threshold means it is extremely unlikely that any tax will be due in the first few years following the opening of an account, even where the maximum contribution is made.
As previously outlined, providers of the accounts will be responsible for calculating, reporting and paying any tax due to Revenue on behalf of the investor, simplifying the administrative burden for taxpayers.
Legislation for the new account will be contained in the upcoming Finance Bill and accounts should be available from 1 July 2027.
Funds Taxation
Building on the reduction in the rates of taxation that apply to investments in Irish domiciled funds and life assurance policies in last year’s budget, from 41% to 38%, the Minister today announced a further reduction in the rate to 35%. This reduction will also apply to equivalent offshore funds and ETFs.
In his speech, the Minister referenced that work will continue on the wider regime, including the rate of taxation, deemed disposal and the administrative burden facing investors, and that there is an intention to make further progress on removing barriers to investment. He also stated that he will take further action to simplify the legislation underpinning the taxation of retail investment, providing clarity regarding how tax on investments such as ETFs operates, this year.
While the 8-year deemed disposal rule will not apply to investments within the abovementioned Investment Account, it seems that, for now, the rule is to remain for direct fund investments.
Capital Gains Tax
The Minister announced a reduction in the rate of Capital Gains Tax from 33% to 31%. This reduction takes effect for disposals on or after 7 October 2026.
Bank Levy
The Banking Levy is to be extended for a further year, with a target yield of €200 million.
R&D Tax Credit Regime
Following changes made in recent years to the regime, Budget 2027 provides for the following further enhancement to the regime:
- An increase in the existing limits for subcontracting to third level institutions and third parties, from 15% to 20%, and from €100,000 to €200,000.
- An increase in the first-year payment threshold from €87,500 to €105,000, to further support smaller R&D projects.
- Introducing a new enhancement in respect of qualifying R&D wage costs.
- Providing that if a clinical trial is regulated, this fact may be used to satisfy the science test, to reduce administrative burden and recognise R&D work undertaken by Irish companies as part of global trials.
- Providing for a simplification measure to improve recognition of the R&D tax credit for preliminary tax purposes.
Preliminary Tax Changes
The Minister also announced that he is making a number of amendments to preliminary corporation tax rules to reduce uncertainty, improve flexibility and reduce the administrative burden for companies. The proposed amendments are:
- 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.
- An increase in the small company threshold from €200,000 to €350,000. This is the threshold, referring to corporation tax liability of the prior year, up to which a company is considered to be a “small” company and therefore subject to less onerous preliminary tax requirements.
Review of Tax Treatment of Interest
Today, the Minister announced that, as part of the ongoing review of Ireland’s taxation regime for interest, he will be introducing several targeted amendments in the upcoming Finance Bill to simplify the existing provisions governing interest relief on borrowings taken out for certain lending and investment activities.
