With the recommendations of the Government’s “Funds Sector Review 2030” in mind, what changes can be included in Budget 2026 to make investing more attractive for retail investors in Ireland?
Contributor: Angela Fleming, Partner & Head of Financial Services Tax, BDO
With the Terms of Reference of the Fund Sector 2030 review explicitly called for an examination of the taxation regime for funds, life assurance policies and other related investment products, this aspect of the Funds Review evolved into a broader consideration of retail investor participation in Ireland.
This evolution was driven by responses to the public consultation and increased interest as part of the Capital Markets Union. As a result, the Funds Sector 2030 Report contained an entire section (Section Seven) focussed on enabling more retail investment.
It was recognised that, despite Ireland’s position as a major centre for the international funds industry, there are low levels of domestic participation in capital markets (particularly ETFs).
This evolution was driven by responses to the public consultation and increased interest as part of the Capital Markets Union. As a result, the Funds Sector 2030 Report contained an entire section (Section Seven) focussed on enabling more retail investment.
It was recognised that, despite Ireland’s position as a major centre for the international funds industry, there are low levels of domestic participation in capital markets (particularly ETFs).
The review team made a number of recommendations for reforms to the taxation of Irish-domiciled funds and life products, with similar amendments made to the equivalent products in EU,EEA and OECD territories, to bring the regime into closer alignment with the taxation of other savings and investment products:
-
Removal of the 8-year deemed disposal requirement for both funds and life products;
-
Alignment of the rates of Investment Undertaking Tax (IUT) and Life Assurance Exit Tax (LAET) with the CGT rate (currently 33%)
-
Introduction of provisions to allow for a limited form of loss relief
-
Repeal of the 1% Life Assurance Levy
The Review Team recommended that reform should begin with the Investment Undertaking regime given its links to the objectives of the Capital Markets Union and the Retail Investment Strategy.
The Funds Sector 2030 Report also recommended that the work to simplify and consolidate the tax regime for offshore funds is prioritised. Under the current taxation system, differing tax treatments can apply to funds that economically similar, leading to confusion and complexity for investors.
We are unlikely to see substantial changes to the taxation regime for offshore funds in Budget 2026, however, we would strongly endorse the commencement of a review of the regime as a matter of priority as overhaul of the regime will itself be complex and require careful navigation.
Finally, as mentioned in the Funds Sector 2030 Report, there could be potential merit in introducing an incentivised savings and investment account. We acknowledge and support the view of the Review Team that reform of the existing tax regimes should take priority to the introduction of a new product, therefore, this is not a matter for Budget 2026.
However, we strongly believe that this option should be explored as soon as possible to further augment the Irish product offering, and to stimulate a greater level of investment by the domestic retail sector.