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Irish Budget 2025; What are the Key Takeaways and What Do They Mean for Businesses?
As a leading provider of corporate and compliance services with a presence in Ireland, the Netherlands and the United Kingdom, our focus at VANTRU is firmly set on assisting businesses across various sectors to expand across global jurisdictions.
The 2025 Irish Budget was announced on 1 October by Minister of Finance, Jack Chambers – let’s take a look at some of the key takeaways and what they mean for businesses in Ireland from a Foreign Direct Investment (FDI) perspective.
What are the key changes under the 2025 Irish Budget?
During his speech to the Dáil, Minister Chambers announced three major changes to Irish Tax Law which are envisaged in the following key areas:
- Participation Exemption
- Interest Deductibility
- R&D Tax Credits
Participation Exemption
Of particular focus for the FDI community will be the introduction of a participation exemption on foreign sourced dividends and distributions and whether the forthcoming legislation and simplified mechanism for double tax relief calculations achieves the desired reduction in administrative burden and operational complexity.
While the specific details are not yet available, current indications, based on the recent Feedback Statement, are that the dividend may only qualify if paid during or after an uninterrupted period of twelve months in which the receiving company controls at least 5% of the ordinary share capital of the payer. The full details on the participation exemption will be set out in the Finance Bill and it’s important that the exemption is not limited by reference to distributions paid from ‘profits.’
Interest
Given the complexity of the taxation and deductibility of interest, it is likely that significant engagement with key stakeholders including the FDI sector will be required over the coming year to ensure that priorities are achieved.
As a first step, the department launched a public consultation on 27 September 2024, seeking stakeholders’ views in a number of areas, including:
- The taxation of interest
- The deduction of interest (in general)
- The interest limitation rule under the EU Anti-Tax Avoidance Directive, together with other anti-avoidance rules and restrictions relating to the deduction of interest
- The tax treatment of interest relating to financial services transactions
- Withholding taxes on interest and
- Reporting obligations for payers of interest
This is very welcome as interest deductibility in Irish Tax Law is overly complex.
R&D Tax Credit
The change to the R&D thresholds announced in Budget 2025 would provide cash flow support to companies engaging in smaller R&D projects. The FDI sector will be primarily interested in the review of the current R&D credit regime and any conclusions arising from same, which the Minister referenced, would be undertaken over the coming year.
This is a positive update and will provide a vital cashflow benefit to companies engaged in smaller R&D projects or engaging with the credit for the first time.
What Do These Updates Mean for Business?
The above changes are to be welcomed as they will improve Ireland’s attractiveness as a place to do business.
However, it goes without saying that a budget speech can only outline the changes broadly, and the tax implications will not be fully ascertainable until the Finance Act is passed, which is expected to happen in around two months’ time.
These changes in tax law will present opportunities for businesses. Let our team of experts at VANTRU advise you fully on what these changes could mean for your business.
Contact us by emailing: info@vantru.com or visit: www.vantru.com.