Participation exemption
Some of the most called-for changes implemented by the Bill limit the anti-avoidance provisions in and extend the scope of the dividend participation exemption (the “DPE)” introduced by Finance Act 2024 from 1 January 2025.
Geographic scope
The original form of the DPE was limited to companies resident in an Irish treaty country or EEA state in scope. In a welcome move, the Bill will extend this to territories that generally impose a foreign withholding tax on distributions, provided that foreign withholding tax has been paid by the relevant subsidiary on the full amount of the distribution and is non-refundable.
“Relevant subsidiary” anti-avoidance measures
The Finance Act 2024 introduced mechanical anti-avoidance measures which included that the acquisition by the non-Irish subsidiary of share capital from another company resident in a non-Treaty jurisdiction could disapply the exemption. This made the exemption difficult to administer in practice and placed a heavy burden of diligence on the taxpayer, particularly for minority investments or acquired companies.
The Bill clarifies with effect retrospectively to distributions made on or after from 1 January 2025.
Reduced diligence period
There has been a requirement that the subsidiary was resident in a qualifying jurisdiction for the five years prior to the date of the distribution (or from the time of its formation, whichever was later). This period has been reduced from five years to three years to ease the administrative burden.
Corporate tax
Capital Allowances for Intangible Assets (Section 291A)
Section 291A of the Taxes Consolidation Act 1997 (“TCA 1997”) grants tax depreciation / capital allowances to capital expenditure on intellectual property assets subject to an 80% limit for depreciation and related interest.
The Bill includes balancing charges on the 80% cap.
The Bill amends the way in which excess capital allowances, and now balancing allowances, which are not used in the period because of the 80% cap and ring-fencing restrictions are carried forward. The excess amount created is to be treated as an allowance that has been made in the first accounting period in which it accrues instead of being an allowance for future years. This aligns with other capital allowances.
The Bill amends certain reorganisation provisions to permit the carry forward of excess interest to also transfer when the conditions for transfer are satisfied.
Dividend withholding tax exemption for payments to ILPs and equivalent partnerships
The Bill contains a new dividend withholding tax exemption for payments to Irish investment limited partnerships (“ILP”) or equivalent partnership authorised in another EEA State.
The exemption will be available where:
- the partners are beneficially entitled to at least 51% of the ordinary share capital in the dividend paying company;
- the ordinary share capital of the dividend paying company is an asset of the ILP or equivalent partnership; and
- the ILP or equivalent partnership has provided the dividend paying company with a Revenue prescribed declaration.
Stamp duty measure for Irish SMEs and start-ups trading on regulated markets
The Bill has introduced a new exemption from the 1% rate of stamp duty on the acquisition of shares. This exemption applies to shares in Irish registered companies that:
- are listed on a regulated market, multilateral trading facility, or equivalent third-country market; and
- have a market capitalisation below €1 billion.
This exemption will apply to conveyances or transfers of shares until 31 December 2030.
The existing stamp duty exemption for the transfer of shares in Irish registered companies traded on the Euronext Growth Market, as set out under Section 86A of the TCA 1997, will be removed.
Property incentives
Corporation tax exemption and enhanced deduction
Rental income arising from cost rental developments is now 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 will apply to projects where commencement notices issue between 8 October 2025 and 31 December 2030.
Research & development tax credit
The rate of the corporation tax credit is increased from 30 percent to 35 percent, and the amount of the first-year payment has increased from €75,000 to €87,500.
The Bill introduces an amendment specifying that where a company can demonstrate that at least 95% of an employee’s time is spent on qualifying R&D activities, then 100% of that employee’s emoluments will be deemed to be incurred wholly and exclusively in the carrying on of R&D activities.
The Bill also amends the definition of qualifying expenditure definition to clarify that expenditure incurred by a company on the construction of a qualifying building shall include expenditure incurred by the company on the construction of a laboratory used for R&D activities.
Special Assignee Relief Programme (SARP)
The Bill extends the SARP’s duration to December 2030 and increases the minimum qualifying salary to €125,000 from 1 January 2026. It also modifies the administrative framework by extending the notification deadline from 90 to 180 days.
However, where notification occurs after 90 days but before 180 days, the relief will apply for only four consecutive years, rather than five.
Key Employee Engagement Programme (KEEP)
The Bill introduces a limited amendment to the KEEP, extending its duration to 1 January 2029.
Entrepreneur relief
The Bill introduces a modest enhancement to the Revised Entrepreneurial Relief by increasing the lifetime limit for the 10% capital gains tax rate from €1 million to €1.5 million, effective from 2026.
Film tax credit
The film corporation tax credit now includes an enhanced credit for qualifying visual effects projects of 40%.
This credit will be available where not less than €1 million has been spent on relevant visual effects work in the State and up to a maximum of €10 million. Once the €10 million threshold is exceeded, the standard credit of 32% will be available on qualifying expenditure up to €125 million.
Digital games tax credit
The Bill has extended the Digital Games Tax Credit (the “DGT Credit”) for six years and broadened its scope to include post-release content development as qualifying expenditure.
This means that the DGT Credit now applies to updates, expansions, and additional content created after a game’s release.
Financial services: Savings and investment
Savings, investment products and the funds industry
The Bill proposes the tax rate on payments made from Irish funds, and equivalent offshore funds and foreign life assurance products to Irish individual investors (i.e., exit tax and life assurance exit tax) be reduced from 41% to 38% from 1 January 2026.
Annual reporting by qualifying fund managers
A qualifying fund manager will be obliged to file an annual return in respect of all approved retirement funds it administers for each year of assessment. The return must be filed within three months following the end of each year of assessment, beginning with the year of assessment 2026.
Foreign body corporates
The Bill provides that where a foreign body corporate is substantially similar to an Irish partnership, it and each of its members will be chargeable to tax on their respective income, profits or gains on the basis that the foreign body corporate is a partnership.
Corporation tax groups
Currently, payments can be made between companies in corporation tax groups without the deduction of tax. In order to be in a corporation tax group, there must be at least a 51% direct/indirect ownership relationship between the paying and receiving companies.
When determining whether such a group exists, any share capital held, directly or indirectly, in a company not resident in an EU or EEA State, or in the UK is ignored. The Bill extends this to include share capital held, directly or indirectly, in a company that is resident in a relevant territory – being a country with which Ireland has a double tax treaty.
Interest deduction on loans from connected companies
Section 840A of the TCA 1997 contained an anti-avoidance provision which disallowed interest deductions on debt between connected parties where those borrowings were used to purchase assets from a connected company.
The Bill proposes to remove this restriction provided:
- the connected company borrowed funds to purchase the relevant asset and that connected company was entitled to a deduction for interest payable on that loan;
- the connected lender is subject to tax, in Ireland or a country with which Ireland has a double tax treaty, on interest income receivable under the loan;
- the asset is purchased for the purposes of the borrower’s trade; and
- the asset sale is carried out for bona fide commercial purposes.
Pillar Two
The Bill amends and provides clarity on the operation of existing sections of the implementing legislation for the Pillar Two minimum effective tax rate in respect of large groups and companies.
These changes include:
- An amendment to the definition of ultimate parent entity (UPE) in section 111A of the TCA 1997 to clarify that it excludes an orphan entity where there is another entity in the group that is not an orphan entity and meets the definition of an Ultimate Parent Entity.
- An amendment to clarify that any domestic top-up tax (QDTT) calculated for a securitisation entity that is a minority-owned constituent entity, will be allocated to other group members in line with the existing mechanism.
- An amendment to the definition of minority-owned constituent entity (MOCE) to clarify that it includes an orphan entity that is a constituent entity.
- Amendments to clarify that the secondary collection mechanism will not apply to a securitisation entity where there is at least one other non-securitisation entity in the Undertaxed Profits Rule (UTPR) group or QDTT group, as the case may be, which is not the UTPR or QDTT group filer.
Revenue powers
The Bill strengthens Revenue’s powers to counteract tax avoidance by expanding the scope of section 811C(4)(a) of the TCA 1997. The revised wording now allows Revenue to withdraw a tax advantage arising from any action—or failure to act—by a taxpayer that directly or indirectly seeks to obtain such an advantage.
The Bill also amends:
- section 638A of the TCA 1997 to extend the transfer of rights and obligations under company mergers or divisions to include those arising under Part 4A of the TCA, which implements the Pillar II global minimum tax rules;
- section 869 of the TCA 1997 to allow Revenue to issue income tax return notices electronically via MyAccount or ROS;
- section 959AA of the TCA 1997 to extend Revenue’s power to make or amend assessments beyond the standard four-year time limit in order to give effect to a Mutual Agreement Procedure (MAP) outcome under a Tax Information Exchange Agreement (TIEA).
- section 959I of the TCA 1997 to clarify that a chargeable person who files a tax return after the specified deadline may still claim allowances, deductions, or reliefs in that return—unless another provision of the Acts explicitly prohibits late claims.
