Contributor: Maoliosa McHugh, Senior Manager, Tax, BDO
Ireland’s start-up businesses and entrepreneurs face major challenges in the current climate. Funding is difficult to source, the retention of skilled talent and increased regulatory and compliance pressures has led to continued stress on entrepreneurs and start-up businesses. Irelands Capital Gains Tax (“CGT”) rate is one of the highest in the OECD which weakens long‑term incentives for founders and early investors. Entrepreneur Relief has played a critical role in addressing this issue as it encourages founders to start companies, scale them, and reinvest in new ventures. As we look ahead to Budget 2027, strengthening Entrepreneur Relief would materially enhance Ireland’s ability to support enterprise and foster a culture of entrepreneurship and on that basis we are advocating for the below changes.
Increase the Lifetime Limit and Introduction of Roll Over Relief
The lifetime limit increase from €1m to €1.5m in 2026 was welcomed. We are calling for the limit to increase further to €3million. This will encourage founders to grow and make a success of their business, incentivise exits and encourage further investment in the Irish economy. Reinvestment could be further encouraged by introducing a roll over CGT relief allowing entrepreneurs to defer CGT, where they exit one business, reinvest and become active in a new venture.
Relaxation of the 3-Year Working Requirement
To currently qualify for the relief, 50% of working time must be spent in a “managerial or technical capacity” for a continuous period of three years in the previous five years. This does create issues as some investors provide strategic value but may not meet the “qualifying person” test. We advocate for two targeted reforms, the removal of the “managerial or technical capacity” requirement and the allowance of the aggregation of working time across multiple qualifying trading companies.
Reduction of the 5% Shareholding Requirement
There is a current 5% shareholding requirement to qualify for Entrepreneur Relief. We are seeing in practice that some founders of companies can dilute below 5% during multiple investment rounds. A lower threshold or a “founder” carve‑out would be welcome. This would recognise the reality of modern equity structures to ensure founders who materially contribute still qualify. This reform would also support employee shareholders and family‑owned businesses with more complex group arrangements.
Taken together, these targeted reforms would reflect the reality of portfolio venture building, create a cycle of reinvestment and support a culture of serial entrepreneurship which would broaden access to the Entrepreneur Relief and ensure Ireland remains a competitive, entrepreneur led economy.
Content adapted from Finance Dublin Irish Tax Monitor.