Business tax - Budget 2026

Cost rental property

A new exemption from corporation tax on rental profits arising from homes that are designated as cost rental properties is provided for. The exemption is proposed in order to accelerate the delivery of affordable homes to the market, which has been struggling to meet demands and Government targets.

The rents for cost rental properties are set to cover the costs of delivering, financing, managing and maintaining them. This means that the rents are not subject to market pressures and properties are expected to be offered to tenants at rents at least 25% below market level. There are pre-existing rules governing the eligibility of tenants and the operation of letting processes to ensure transparency and compliance with the Cost Rental scheme’s objectives.

The exemption will apply in respect of properties designated as Cost Rental by the Minister from 8 October 2025.

Enhanced deduction for apartments

An enhanced corporation tax deduction is being introduced for qualifying apartment construction costs. The measure will allow an enhanced deduction of 125% of qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit.

This will be provided to a developer who is the beneficial owner of the property at the time it is completed. The enhanced deduction will be available for projects comprising of 10 or more apartments. It will be available for both new-build developments and for conversion projects, including a change of use, such as the conversion of offices or retail spaces into apartments. The enhanced deduction will be available in respect of projects for which a Commencement Notice is submitted on or after 8 October 2025, and on or before 31 December 2030.

This new measure aims to reduce the amount of corporation tax developers have to pay on their profits. By lowering tax costs, the government hopes to encourage more apartment construction and boost housing supply.

Tax simplification

Budget 2025 introduced a participation exemption for foreign dividends. This is a simplified method of providing double tax relief for dividends received from foreign subsidiaries within the EU or EEA and tax treaty partner jurisdictions. Budget 2026 announced a number of changes to the exemption. These changes include:

• Extending the geographical scope of the relief beyond dividends paid by subsidiaries in the EU/ EEA and double tax treaty jurisdictions to include qualifying dividends received from jurisdictions that apply a non-refundable dividend withholding tax.
• Reducing the period for which companies must have been resident in a jurisdiction within the geographic areas mentioned above before paying a dividend from five years to three years.
• Clarifying that the acquisition of a shareholding is not considered to be an acquisition of business assets for the purposes of the participation exemption.

Interest reform

• The Minister announced that he will be publishing an Action Plan to reform Ireland’s tax regime for interest. The Action Plan is based on responses received to a consultation on the tax treatment of interest, which was announced in Budget 2025 and concluded earlier this year. The main objective of the consultation was a fundamental reform of the underlying framework for the taxation and deductibility of interest.
• It is proposed that a phased approach will be rolled out to achieve a simplified regime that supports competitiveness and protects the tax base. In this regard, a feedback statement will be published by the Department of Finance in November for further consultation.

Withholding taxes

As an ongoing effort to modernise the Irish tax system, the Minister announced in Budget 2026 that a joint Department of Finance and Revenue public consultation will be launched, with the aim of exploring opportunities to modernise, digitalise and further expand the scope of withholding taxes.  

Research and Development Tax Credit (RDTC)

Finance Act 2023 increased the Research and Development Tax Credit (“RDTC”) rate from 25% to 30% of qualifying R&D expenditure. Budget 2026 has gone further, raising the rate to 35%, reinforcing Ireland’s commitment to supporting innovation and enterprise.

The RDTC is typically paid in three annual instalments: 50% in Year 1, 30% in Year 2, and 20% in Year 3. However, where the RDTC amount is less than or equal to the first-year payment threshold, the full credit may be refunded in Year 1.

Budget 2026 increases this first-year payment threshold from €75,000 to €87,500. This means that companies with qualifying R&D expenditure of €250,000 or less will receive the full RDTC of €87,500 (€250,000 × 35%) in the first year.

These measures are a positive development. The increased RDTC rate of 35% applies to all claimants, regardless of size. The higher first-year threshold will be particularly beneficial for smaller companies, improving cash flow and enabling them to access the full value of the credit sooner.

The Minister also confirmed that a new publication will be released in the coming weeks to examine potential refinements to the RDTC regime to better align with industry practices. It will look at areas such as outsourcing and qualifying expenditure, as well as outline future plans to strengthen Ireland’s innovation supports.

Film Tax Credit – Enhancement for visual effects

Ireland’s Section 481 Film Tax Credit continues to evolve in support of the domestic screen industry and international production.

Budget 2026 introduces a targeted enhancement for relevant visual effects work. Productions that incur at least €1 million in eligible expenditure on visual effects will qualify for a new 40% rate of relief, up to a maximum of €10 million per production.

This is a welcome boost for the sector and is expected to support further investment in Ireland’s creative and technical talent base.

The changes will be subject to a commencement order, pending consideration by the European Commission under State aid rules.

Digital Gaming Tax Credit

The Digital Gaming Tax Credit (DGTC) which came into operation in 2022, provides for a 32% tax credit on qualifying expenditures incurred in the development of digital games in Ireland and was due to expire on 31 December 2025. The Minister announced the extension of the credit to 31 December 2031, along with new measures to allow for claims in respect of post release content work, where the original game availed of the DGTC.

This announcement confirms the commitment of the government to establish this credit over the long term and create certainty for the sector. While the eligibility of claims to include post release content work is welcome, many issues relating to the scope and operation of the credit remain and are limiting the uptake of this credit.

The changes will be subject to a commencement order, pending consideration by the European Commission under State aid rules.

Revised Entrepreneur Relief

Revised Entrepreneur Relief, originally introduced in 2016, is a relief from Capital Gains Tax (CGT), available to individuals who dispose of “qualifying business assets”. The business assets can comprise of shares held by an individual in a trading company or an asset (such as goodwill) used in a trade carried on by a sole trader. The relief provides for a reduced CGT rate of 10% (standard rate being 33%) on gains arising from the disposal of qualifying business assets. A lifetime limit of €1 million per individual applies, with any gains in excess of this limit being chargeable at the standard rate of CGT of 33%.

In order to support entrepreneurs growing their business, the Minister announced that as part of Budget 2026 the relief’s lifetime limit will be increased to €1.5 million. This change will apply to disposals made on or after 1 January 2026. The remaining conditions continue to apply.