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Individual Investment Account
As announced on Budget Day, the Finance Bill includes the legislative framework for the introduction of the new Individual Investment Account. The investment account, which will be available from 1 July 2027, is a new approach to the taxation of investments in Ireland, applying to all forms of investments held within a qualifying account.
The primary purpose of the investment account is to make investing simpler, clearer and more accessible. The account is designed to reduce some of the barriers that may discourage individuals from investing and to provide a straightforward, tax-efficient framework.
The account will be available to Irish resident individuals, aged 18 and over, who hold a PPSN. The account will include a flat rate 1% tax applied to the value of the account above the €50,000 tax free threshold, with an annual contribution limit of €12,000. The value of the account will be calculated daily, with the average of the daily values being used for the purpose of calculating the tax due, if any. On launch, only one account will be allowed per person, with consideration being given in future years to whether provision can be made for multiple accounts. The account provider will be responsible for calculating whether tax is due or not, and for paying any tax due to Revenue on behalf of the investor. Existing taxation regimes in place for retail investments, including the deemed disposal rule, will not apply to the account.
Investment Funds and Life Assurance Products
The Bill reduces the rate applying to gains from Irish investment undertakings, equivalent offshore funds and life assurance policies from 38% to 35%.
The reduced rate will apply to relevant chargeable events, payments and disposals occurring on or after 1 January 2027.
This follows the reduction from 41% to 38% introduced last year and further reduces the difference between the taxation of investment products and the revised standard rate of Capital Gains Tax.
The eight-year deemed disposal regime has not, however, been removed for investments held outside an IIA.
The Bill also clarifies and consolidates some of the legislation underpinning this area of taxation, by introducing new provisions specifically dealing with the taxation of investors in Irish domiciled investment funds whose units are held in a recognised clearing system (including Irish domiciled exchange-traded funds (ETFs)). These new provisions aim to align with the existing rules which apply to other Irish domiciled investment funds and the 35% rate of tax will apply.
Taxation of Interest
The Bill proposes a number of targeted amendments to interest legislation with the aim of simplifying the existing provisions governing the taxation of interest. The proposed amendments include changes to the provisions governing corporation tax relief for interest on borrowing used to acquire shares in, or lend to, certain companies (known as section 247 relief), as well as to the interest limitation rule.
Capital Gains Tax
The Bill confirms the reduction in the standard rate of Capital Gains Tax from 33% to 31%.
The reduced rate applies to disposals made on or after 7 October 2026.
Banking Levy
The Bill provides for a further 12-month extension of the Bank Levy so that it will continue to apply in 2027. The levy is payable by AIB, Bank of Ireland, EBS and PTSB. The levy applies at the rate of 0.1025% of the value of deposits held by each bank on 31 December 2024, to the extent that such deposits are “eligible deposits” within the meaning of the European Union (Deposit Guarantee Schemes) Regulations 2015.
R&D Tax Credit Regime
Following Budget Day announcements, the Bill provides for a number of enhancements to the R&D tax credit as follows:
We understand that technical work is ongoing on the development of relevant legislation 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. We expect that the amendment to introduce this legislation will be proposed at Committee Stage.
Preliminary corporation tax
The Bill increases the corporation tax liability threshold for treatment as a small company from €200,000 to €350,000.
It also introduces a new top-up mechanism. A company that has paid at least 80%, but less than 90%, of its final liability by the normal preliminary tax date may preserve its preliminary tax position by making a further payment within four months after the end of the accounting period, bringing the aggregate payment to at least 100% of the final liability.
The changes will apply to accounting periods commencing on or after 1 January 2027.
Pillar Two
The Bill includes amendments to be made to Pillar Two legislation to reflect the agreement of the OECD Side-by-Side Package in January of this year. Ireland is required to implement the agreement within specific timeframes in order to pass the OECD peer review process. The agreement provides for the following safe harbours:
We understand that amendments will also be made to reflect further agreed Administrative Guidance published by the OECD in May and September this year. The Pillar Two rules in relation to penalty and filing provisions are also being updated.