Business tax - Budget 2027

Capital Gains Tax (CGT) rate 

The standard rate of Capital Gains Tax (CGT) will be reduced from 33% to 31% in respect of disposals made on or after 7 October 2026. However, the CGT rate applicable to disposals of Irish development land within the scope of Section 649A of the Taxes Consolidation Act 1997 will remain unchanged at 33%. 

Research and Development Tax Credit

Budget 2027 introduces a number of enhancements to the Research and Development Tax Credit (RDTC) regime, building on the recommendations contained in the Government’s R&D Compass and further strengthening Ireland’s support for innovation.

A significant change relates to subcontracted R&D activities. Currently, outsourced R&D expenditure is limited to the greater of 15% of a company’s in-house R&D expenditure or €100,000. Budget 2027 increases these limits to 20% and €200,000 respectively, allowing companies to claim relief on a greater level of qualifying outsourced R&D expenditure.

The first-year payment threshold is also increasing from €87,500 to €105,000. This means that companies with qualifying R&D expenditure of €300,000 or less will receive the full RDTC of €105,000 (€300,000 × the RDTC rate of 35%) in the first year, as opposed to being paid over a number of years.

The Minister also announced an enhancement to R&D expenditure. While further detail will be contained in the Finance Bill, it would appear that existing qualifying expenditure will be topped up by 5% of qualifying R&D wage costs, subject to the company having incurred a sufficient level of expenditure. In addition, where a clinical trial is regulated, this fact may be used to satisfy the science test for RDTC purposes, reducing the administrative burden associated with preparing claims.

Finally, a simplification measure is being introduced to improve recognition of the RDTC for preliminary tax purposes. This is welcomed as it will have a cashflow benefit. 

Knowledge Development Box (KDB)

Budget 2027 provides for a five-year extension of the Knowledge Development Box (KDB) regime, providing continued certainty for companies generating income from qualifying intellectual property developed through Irish R&D activities. 

Recognising the significant changes that have occurred in the international tax environment since the KDB was introduced, the Minister also announced a limited option for existing claimant companies to elect to opt out of the regime in respect of all qualifying assets.

The extension of the regime is welcomed and reaffirms the Government’s commitment to supporting innovation and intellectual property development in Ireland, while the opt-out provision provides additional flexibility for companies whose circumstances may have changed.

Tax relief on start-up companies

 The Start-Up Relief (Section 486C TCA 1997) is being extended for a further four years to 31 December 2030. The relief provides qualifying start-up companies with an exemption from corporation tax on trading profits and certain capital gains during their first five years of trading. 

Full relief is available where a company's corporation tax liability does not exceed €40,000, with marginal relief available where the corporation tax liability is between €40,000 and €60,000. The relief is also subject to a cap based on the amount of qualifying employer PRSI paid by the company, which is €5,000 per employee per year and €1,000 per owner-director (Class S PRSI) per year.

Relief for Investment in Corporate Trade

The Relief for Investment in Corporate Trades comprises the Employment Investment Incentive (EII), the Start-Up Capital Incentive (SCI) and the Start-Up Relief for Entrepreneurs (SURE). These reliefs provide income tax relief for risk capital investments in qualifying small and medium-sized enterprises (SMEs). As these reliefs constitute State aid, they operate under the General Block Exemption Regulation (GBER). The GBER is currently under review, with the revised regulation expected to be adopted by the end of 2026 and to come into effect on 1 January 2027. Subject to the adoption of the revised GBER, it is intended that these reliefs will be extended in their current form.

As a result, investors and entrepreneurs should continue to have access to income tax relief for qualifying investments in SMEs beyond 2026, subject to the adoption of the revised GBER and any associated legislative changes.

Capital Gains Tax (CGT) Relief for Investment in Innovative Enterprises

The Capital Gains Tax (CGT) Relief for Investment in Innovative Enterprises, commonly known as the Angel Investor Relief, is designed to encourage business angel investment in innovative start-up companies. As the relief constitutes State aid, it operates in accordance with the General Block Exemption Regulation (GBER). A revised GBER is expected to be adopted by the end of 2026 and to come into effect on 1 January 2027. Subject to the adoption of the revised GBER, it is intended that the relief will be extended in its current form.

This will provide continued support for investment in innovative start-up businesses and greater certainty for investors seeking to avail of the relief beyond 2026, subject to State aid approval under the revised GBER.

Changes to Preliminary Corporation Tax

In order to reduce uncertainty and improve flexibility for companies, Budget 2027 will provide for the following administrative changes to preliminary corporation tax requirements:

• An extension to the current limited top-up mechanism, to provide that preliminary tax requirements are satisfied where at least 80% of the current year liability has been paid by the final preliminary tax instalment date and a top-up payment to reach 100% of the liability is made within four months of the end of the accounting period. This will help companies with meeting their preliminary tax requirements and help to prevent interest accruing on underpaid preliminary tax.
• The 45% deeming provision is being removed in calculating preliminary corporation tax for ‘large companies’ and late-payment interest. As a result, an underpayment of the second instalment of preliminary tax will no longer give rise to a deemed underpayment of the first instalment where the first instalment was paid at a level of at least 50% of the prior year’s corporation tax liability. This change will ensure that ‘large companies’ which satisfy the 50% prior-year liability requirement are not subject to interest on an underpayment of the second preliminary tax instalment.
• The ‘small company’ threshold for preliminary corporation tax purposes will increase from €200,000 to €350,000. The threshold is determined by reference to the company’s corporation tax liability in the preceding accounting period. Companies qualifying as ‘small companies’ benefit from simplified preliminary tax obligations. The increase is expected to reduce the administrative burden for companies that were previously marginally above the existing threshold. 

These are welcomed changes as the preliminary tax regime has not been amended in a significant period of time. The changes will simplify tax payment calculations, while not penalising companies for inadvertent underpayments.