Irish Budget 2026: Key Insights

Corporation Tax

The 2026 Budget confirmed that Ireland’s 12.5% Corporate Tax rate remains unchanged. This stability will continue to underpin Ireland’s position as a leading European hub for international investment and businesses choosing the region as the headquarters for their operations.

Research and Development (R&D) Tax Credit

The R&D tax credit system provides a 30% tax credit for qualifying R&D expenditure.  Under the current system, a company has the option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities.

A number of enhancements to the scheme were announced including:

• An increase in the rate of tax credit from 30% to 35%
• An increase in the first-year payment threshold from €75,000 to €87,500
• An administrative simplification measure to allow 100% of an R&D employee’s emoluments as qualifying costs where at least 95% of their time is spent on eligible R&D activities

An R&D Compass will be published in the coming weeks that will outline the long-term policy direction for developments in R&D and innovation supports.

Pay Related Social Insurance (PRSI)

Previously, the Budget 2024 provided an increase in all PRSI contribution rates, both for employees and employers. All classes of PRSI increased by 0.1 percent from 1st October 2024. This was followed by a further 0.1 percent in October 2025 with further increases of 0.15 percent in October 2026 and 2027 and 0.2 percent in October 2028.
Capital Allowances for Intangible Assets

Companies may claim capital allowances on Intellectual Property (IP) acquired for use in their trade, capped at 80% of relevant trading profits each year, with unused amounts carried forward.

Immediate amendments have been introduced to clarify how balancing allowances apply when IP assets are disposed of or transferred.

Taxation of Investments

The Finance Bill 2025 will reduce tax rates on investments in Irish domiciled funds and life assurance policies, as well as on the equivalent offshore funds and foreign policies. The amendments are as follows:

• The rate of Investment Undertaking Tax (IUT), which applies to Irish domiciled Irish Collective Asset Management Vehicles (ICAVs,) Authorised Investment Companies and Unit Trusts, is being reduced from 41% to 38%.
• The rate of Life Assurance Exit Tax (LAET), which applies to policies contracted since 2001 with Irish domiciled life assurance companies, is being reduced from 41% to 38%.
• The rate of tax that applies to investments in offshore funds located in the EU or EEA, or in a member state of the OECD with which Ireland has a double taxation agreement, and which are considered equivalent to Irish domiciled funds, is being reduced from 41% to 38%. The rate change will apply to Exchange Traded Funds (ETFs) that are subject to tax under this regime, including Irish domiciled ETFs.
• The rate of tax which applies to life assurance policies commenced after 2001 by a life assurance company, agency or branch operating in an EU, EEA or an OECD member state with which Ireland has a double taxation treaty is being reduced from 41% to 38%.

Special Assignee Relief Programme (SARP)

SARP has been extended to 31 December 2030, continuing to offer tax relief for employees assigned to work in Ireland. From 1 January 2026, new entrants must earn at least €125,000 to qualify and can claim relief on 30% of income between €125,000 and €1 million. Existing claimants who continue to avail of SARP in 2026 or further years will not be impacted by this change and administrative processes will be simplified.

Foreign Earnings Deduction (FED)

The FED scheme is being extended to 31^st December 2030, continuing to provide income tax relief for Irish resident employees working temporarily in qualifying countries.

From 1 January 2026, the income cap increases from €35,000 to €50,000 and the scheme will expand to include the Philippines and Turkey. Administrative updates will also simplify compliance and ensure the relief remains appropriately targeted.

If you have any queries about how these updates will impact your business, get in touch with our expert team today.

Email: info@vantru.com or visit www.vantru.com.