07/10/2025
Insights Blog

Budget 2026 introduces a suite of real estate-focused tax measures aimed at addressing Ireland’s ongoing housing supply challenges. These measures are particularly relevant to residential developers and institutional investors, especially those active in apartment construction and the provision of cost rental accommodation. 

While the full legislative detail will be set out in the Finance Bill, expected to be published in the next 7–10 days, the headline announcements are set out below. 

VAT reduction for new apartment sales 

  • The VAT rate on the sale of new apartments will be reduced from 13.5% to 9% effective 8 October 2025 until 31 December 2030 – a financial resolution implementing this measure will be passed on budget evening, 7 October 2025.   

Corporation tax exemption and enhanced deduction  

  • Rental income arising from cost rental developments will be exempt from corporation tax with effect from 8 October 2025. 
  • Enhanced corporation tax deduction for certain costs incurred in apartment construction and the conversion of non-residential property to residential – this will apply to projects where commencement notices issue between 8 October 2025 and 31 December 2030. 

New derelict property tax 

  • New derelict property tax to be introduced to replace the derelict site levy.  The tax will be implemented and collected by Revenue. 
  • The applicable rate has not been announced but will not be lower than 7% of the market value of the property (the current derelict site levy rate). 
  • Legislation underpinning the new tax to be introduced in 2026, with a preliminary register of relevant land to be in place in 2027 and implementation of the tax as soon as possible thereafter. 

Residential zoned land tax (RZLT) exemption 

  • RZLT exemption to apply where a landowner obtains a change in the zoning of the land to reflect the activity currently being carried out – legislation to be amended to provide for this in 2026. 
  • Further changes in relation to the operation of RZLT will be in the Finance Bill. 

Residential development stamp duty refund scheme  

  • Residential Development Stamp Duty Refund Scheme (where non-residential land is subsequently developed for residential purposes) to be extended to 31 December 2030.   
  • Accelerated timelines for claims of the refund are also proposed for phased developments.  

Other measures 

  • Small landlords’ entitlement to income tax deductions for retrofitting costs will be extended by 3 years to 31 December 2028. 
  • The Living City Initiative will be extended to 31 December 2030 with tax relief on qualifying regeneration projects to apply to properties built before 1975 and expanded to regional towns including Athlone, Drogheda, Dundalk, Letterkenny and Sligo (alongside existing centres of Cork, Dublin, Galway, Kilkenny, Limerick and Waterford). 
  • Rent tax credit for tenants to be maintained until 31 December 2028. 
  • Mortgage interest relief to be extended to 31 December 2026 with a reduced level of relief applying in 2026. 

Commentary 

These measures reflect a clear attempt to stimulate delivery of residential units, regenerate existing building stock and encourage institutional investment in cost rental housing.  

The VAT reduction, in particular, is expected to improve project feasibility for developers in the apartment sector, where, despite recently announced changes to the rent cap rules which will apply from 1 March 2026, a viability gap persisted.  

The corporation tax exemption is a significant step toward incentivising long-term investment in cost rental housing and aligns with broader government policy to expand the cost rental sector. The full exemption makes cost rental more attractive for institutional investors and developers and is more favourable than what was previously proposed by industry. 

The new derelict property tax is something of a surprise but its implementation and collection by Revenue (the derelict site levy is collected by local authorities) is clearly designed to encourage property owners to renovate or sell on. The RZLT changes were flagged previously, with farmers in particular being concerned about the impact of residential zoning on land that is being actively farmed. 

It is hoped that these measures, alongside other recently announced changes including changes to the rent caps, will contribute to more new residential development, drive greater participation in cost rental schemes, and return derelict and ‘over the shop’ premises to residential use, thereby helping to address both supply and affordability challenges. 

We will provide further analysis when the Finance Bill is published. 

Please contact a member of the Arthur Cox Real Estate or Tax group or your usual Arthur Cox contact for more information.