Contributor: Michelle Adams, Director, Financial Services Tax, BDO
Budget 2027 presents an opportunity to strengthen Ireland's competitiveness as a leading European hub for international financial services and foreign direct investment.
A welcome recent development for taxpayers in the financial services sector was the reduction in the Investment Undertaking Tax (IUT) and Life Assurance Exit Tax (LAET) rates from 41% to 38%. Building on this progress, a further reduction to 33%, aligning these rates with Capital Gains Tax, would enhance Ireland's attractiveness for investment and support greater participation in long-term savings products.
Similarly, the removal of the eight-year deemed disposal regime for funds and life assurance products would simplify the tax system, reduce administrative burdens, and encourage long-term investment in Irish-domiciled funds. These reforms have been consistently identified as key measures to improve retail investor participation and support the growth of Ireland's funds sector.
The removal of the 1% government levy on life assurance premiums should also be considered, helping reduce costs for consumers and improving the competitiveness of the sector.
In addition, the introduction of a Savings and Investment Account would be a welcomed positive development as it has the potential to encourage participation early for savers, improve investor outcomes and contribute to economic growth.
From an FDI perspective, while the introduction of the foreign dividend participation exemption was a positive development, further enhancements should be considered, including extending the regime to Section 110 companies and introducing an exemption for foreign branch profits. Such measures would reduce complexity, ease compliance obligations and further enhance Ireland's competitiveness as a location for international investment and financial services activity.
Content adapted from Finance Dublin Irish Tax Monitor.