Budget 2026: Securing Ireland’s future

Staying agile amid global headwinds

There are significant headwinds facing Ireland at present. Standing at a crossroads, Ireland needs to secure its future as a leading destination for investment, innovation, and private enterprise. As global tax and economic landscapes shift rapidly, Ireland must continue to simplify its tax system, expand incentives, and support businesses and individuals in driving sustainable growth.

The global environment is facing significant upheaval following the new US administration’s shift in trade policy. The US stance regarding the OECD Global Tax Deal threatens the viability of the entire regime, with the possibility of retaliatory tariffs or withholding taxes that could further strain global trade and economic growth. Amid these uncertainties, it is crucial for Ireland to remain agile and advocate for solutions that protect our competitiveness, as well as taking action to control our own controllables.

The Government must provide stability and certainty to incentivise the investment and large-scale development required to meet Ireland’s housing demands. Maintaining certainty of tax policy and preventing the further escalation of construction costs is key. Clear and consistent tax measures can help attract international capital, address construction and financing costs, and support greater affordability.

We outline several constructive measures in our submission, including urgent reforms to the Residential Zoned Land Tax (RZLT), which is causing further headaches rather than alleviating pressure in an area where immediate action is needed. We suggest various measures for stamp duty, including extending the Residential Rebate Scheme and legislative measures to make it fit for purpose.

To promote sustainability, a reduction in Capital Gains Tax (CGT) for retrofitted properties is recommended. Modernising the Real Estate Investment Trust (REIT) regime would allow greater flexibility in income distribution and reinvestment timelines. Enhancing stability and transparency for Irish Real Estate Funds (IREFs) is also encouraged. A temporary VAT reduction on new, affordable homes would help improve viability and affordability for first-time buyers.

The submission highlights key issues facing Irish private businesses, including the high 33% CGT rate and calls for its reduction to 20% to encourage capital transactions and reinvestment. We recommend increases to the Capital Acquisitions Tax (CAT) thresholds, CAT small gift exemption and CGT annual exemption. We suggest increasing the small benefit exemption to €2,500 and removing the restriction to five benefits to encourage employers to reward employees throughout the year.

Shareholder exits via share buybacks should generally be treated as CGT events, with clearer Revenue guidance to broaden relief and increase transparency. Surplus cash held for unforeseen circumstances should qualify for CAT business relief. Businesses providing employee accommodation should benefit from a reduced tax burden: rental income should be taxed at the 12.5% corporation tax rate, exempt from the close company surcharge, and benefit-in-kind relief should apply to below-market rents. Simplifying share-based remuneration would further enhance Ireland’s competitiveness. Reforming the taxation of Employee Ownership Trusts (EOTs) would support succession and employee ownership. Late filings under the KEEP Scheme should incur penalties but not outright denial of relief, ensuring fairness for small- and medium-sized enterprises (SMEs) and employees. The close company surcharge regime should be modernised, especially for passive income and professional services, to reflect current business practices.

Finally, the four-year window of review by Revenue to raise queries or challenge a tax return should be reduced to one year where a taxpayer provides details of a material transaction as part of its tax return.

Amid global economic uncertainties and increased competition, it is crucial for the Government to both retain existing foreign direct investment (FDI) and attract new investment. We call for the enhancement of the research and development (R&D) tax credit, the introduction of targeted incentives for emerging sections like artificial intelligence (AI), and the introduction of new incentives for brand intangibles and intellectual property creation. Additionally, the Government should align exit tax provisions with international best practices to remain agile in responding to global tax changes such as Pillar Two.

Budget 2026 presents a pivotal opportunity for the Government to reinforce Ireland’s reputation by introducing targeted tax measures that foster innovation, sustainability, and digital transformation. Key recommendations include simplifying tax regimes for asset management and banking, incentivising sustainable finance and aviation fuel development, and supporting fintech growth through enhanced investment schemes.

Ireland’s recent adoption of a participation exemption for foreign dividends marks a significant step towards modernising its tax regime. However, there are many issues with the regime in practice which render the participation exemption inoperable for many taxpayers, and as such urgent reforms are required.

Expanding the exemption’s scope and introducing a branch profits exemption would better align Ireland with international standards and enhance its appeal to global investors. It is crucial for the Department of Finance to engage with stakeholders and resolve technical issues, such as the five-year look back requirement, to ensure the regime is workable and attractive. Simplifying and expanding the regime is essential for maintaining Ireland’s status as a leading holding company jurisdiction and for attracting future FDI.

Ireland should prioritise simplification of its tax code to enhance competitiveness and attract investment, building on its reputation as an attractive business destination and providing certainty and clarity to stakeholders. We recommend a clear, multi-year tax simplification roadmap, to guide Ireland’s tax simplification efforts. Collaboration among Government departments, Revenue and stakeholders is essential to ensure effective and meaningful progress.

While Ireland offers valuable tax reliefs (e.g. the R&D tax credit and the Employment and Investment Incentive Scheme (EIIS)), their complexity and administrative burden hinder access – especially for SMEs. PwC calls for simplified processes and documentation requirements alongside a review of legislation for key reliefs to ensure they are operating as intended and the conditions to be met reflect current business realities. This would encourage greater uptake, support innovation and growth in the SME sector, and ensure Ireland’s tax reliefs are fit for purpose.

PwC’s submission recommends a shift in annual reporting requirements for employers (ERR), rather than real-time, to reduce onerous compliance obligations. A shorter, simpler tax return (Form CT1) for small or inactive companies is suggested to reduce unnecessary complexity and allow businesses to focus on growth. Finally, a significant overhaul of interest deductibility rules is also advised.

Ireland’s energy transition is at a critical junction. The country has committed to achieving climate neutrality by 2050 and a 51% reduction in greenhouse gas emissions by 2030. Immediate, decisive action is needed to accelerate investment in renewable energy, decarbonisation, and the circular economy – not only to meet legal obligations, but to sustain economic growth, avoid costly EU penalties, and address the rising financial impacts of climate change. Key challenges include the scale and speed of required investment, supply chain and skills shortages, and the need to lower energy costs for businesses and households.

PwC’s submission calls for tax policy as a tool to drive innovation and investment, with proposed measures such as tax deductions for low-carbon materials, incentives for upskilling in green sectors, and reliefs for decommissioning and food donation. The submission advocates for the extension and enhancement of capital allowances for energy-efficient equipment, the simplification of eligibility criteria, and the inclusion of support for loss-making companies, which can further incentivise sustainable investment.

While progress has been made, more targeted and upfront tax incentives are essential to make the business case for decarbonisation and ensure Ireland plays its role in the global clean energy transition.