PwC launches 2026 Pre-Budget Submission: Proposing an urgent reset of key tax policies to promote Ireland’s competitiveness

PwC today launches its 2026 Pre-Budget Submission proposing a necessary reset of tax policy in a number of key areas to promote Ireland’s competitiveness and secure its future as a leading destination for investment, innovation and private enterprise.

PwC says that a tax policy reset is needed in the following key areas:

• Government housing policy requires an urgent reset. Tax incentives can play a critical role in alleviating the housing crisis. 

• More support for Ireland’s private businesses enabling them to diversify, scale-up and compete on the world stage.

• Targeted tax measures to enhance Ireland's position as a global financial services hub.

• Diversify tax policy to attract new foreign direct investment, particularly AI.

• Urgent efforts to reduce the complexity of Ireland’s tax regime.

• Accelerate tax incentives to support Ireland’s energy transition.

Three key specific measures advocated by PwC are (1) the reform of the Residential Zoned Land Tax (RZLT), (2) broaden tax policy to enable an AI centre of excellence in Ireland and (3) reduce the Capital Gains Tax (CGT) to 20% (from 33%) to help private businesses.

Paraic Burke, Tax Leader, PwC Ireland, said: “In a world of increasing global instability, rising uncertainty and heightened international tax competition, the need to bolster Ireland’s competitive offering has never been more apparent.  With increasing geopolitical risks and uncertainties, Ireland must take action to control our own controllables.  While there are constraints about what we can do at international levels, domestically, Ireland has full control to determine its destiny on key domestic issues such as housing, decarbonisation and energy security.  Ireland must continue to simplify its tax system, expand incentives and support businesses and individuals in driving sustainable growth. Tax policies and incentives, if wisely chosen, could be critical to addressing Ireland’s key infrastructural, housing, climate and other challenges. Following endorsement from the EU to utilise targeted tax incentives, the Irish government should not be afraid to use them. Budget 2026 offers Ireland an opportunity to make changes that can help to direct the future course of our country.”

PwC’s 2026 Pre-Budget Submission calls for a reset of tax policy in the following key areas:

Government’s housing policy requires an urgent reset  

Tax policy can play a vital role in addressing the housing crisis with an urgent whole-of-Government reset needed. Maintaining certainty of tax policy and preventing further escalation of construction costs are key.  More tax incentives are needed to attract greater private investment into the housing market. It is critical that the policy environment for institutional capital is reviewed and enhanced if we are to attract the level of funding which will be required to support significantly increased targets for new housing output.  The most pressing issue to be addressed is implementation of reforms to the Residential Zoned Land Tax (RZLT).  There are several issues with its implementation which should be addressed as a matter of urgency.   

The Real Estate Investment Trusts (REITs) regime does not currently meet its objectives, and as a result only one in four REITs launched are still in operation today.  PwC recommends measures to improve the effectiveness of the REIT regime to enhance its ability to attract the foreign and domestic capital required to meet Ireland’s housing demands. 

PwC also advocates various measures for Stamp Duty, including extending the Residential Rebate Scheme and legislative measures to make it fit for purpose.  A temporary VAT reduction on new, affordable homes would help improve viability and affordability for first-time buyers. To promote sustainability, a reduction in Capital Gains Tax (CGT) for retrofitted properties is recommended.  

More support for Ireland’s private businesses enabling them to diversify, scale-up and compete on the world stage 

Private businesses are the backbone of the Irish economy and face numerous challenges particularly raising funds, managing costs and succession issues. Critical too is diversifying and scaling-up their businesses to compete on the global stage.   

PwC’s Submission calls for the reduction in the 33% Capital Gains Tax (CGT), one of the highest in Europe, to 20% to promote the transfer of businesses to the Irish business leaders of tomorrow. Treating the exit of a shareholder from a business as a CGT event rather than being subject to income tax (and higher tax) would be an important step towards achieving this.

The Submission also calls for increases in the Capital Acquisition Tax (CAT) lifetime thresholds, which remain out of kilter with inflation.   It also recommends increases to the CAT small gift exemption and CGT annual exemption. The small benefit exemption should be increased to €2,500 and the restriction to five benefits should be removed to encourage employers reward employees throughout the year.

Attracting and retaining key talent continues to be an issue. Similar to suggestions in Budget 2025, the PwC Submission calls for Budget 2026 to incentivise the provision of accommodation by Irish businesses to their employees.  At present, where a business rents property to its employees, the company is subject to corporation tax of 25% and a potential close company surcharge.  This is in addition to the potential benefit-in-kind (BIK) liabilities for the employees where rent is at less than market rates.  

Targeted tax measures to enhance Ireland's position as a global financial services hub 

The financial services sector plays a vital role in contributing to Ireland’s employment and tax revenues. Budget 2026 is a key opportunity to introduce targeted tax measures to enhance Ireland's position as a global financial services hub such as introducing tax incentives for sustainable finance, fostering innovation in aviation and fintech, encouraging retail investment and streamlining compliance to enhance Ireland’s attractiveness in the financial services sectors. 

PwC welcomes the recommendations contained in the Funds 2030 Final Review to reform the taxation of Irish funds to encourage retail investor participation and urges introduction of the amendments as soon as practicable, ideally in Finance Bill 2025.

One of the primary areas of focus in the aviation industry’s net zero target ambition is the development and production of sustainable aviation fuel (SAF).  PwC endorses the establishment of the Government task force to develop a national SAP policy roadmap.  There are a number of key tax policy changes that would help mobilise private investment in this area and position Ireland as a critical enabler of SAF.   

Diversify tax policy to attract new foreign direct investment, particularly AI

Attracting foreign direct investment (FDI) remains a key priority for Ireland, especially in the context of current trade uncertainty, global tax reforms and increasing competition for investment. Ireland also needs to diversify tax policy and put plans in place to attract the next generation of multinationals.  Ensuring a stable and predictable tax regime is essential to attract and retain FDI. PwC's Submission emphasises the importance of pro-growth initiatives that attract investment and encourage employment.   

While the technology and pharmaceutical industries continue to play a significant role in Ireland’s economy, we should seek to attract new industries, most notably, one of the fastest growing industries - artificial intelligence (AI), enabling an AI centre of excellence in Ireland. PwC recommends a 100% rate of capital allowances in the initial year of investment.  AI companies require highly skilled people and PwC recommends the Special Assignee Relief Programme to be extended to 2030 at least and that the relief be made more attractive i.e. by either increasing the rate (currently at 30%) at which employees can get relief or decreasing the lower limit of income that remains unrelieved (currently at €100,000).  

The introduction of a participation exemption for foreign dividends in Finance Act 2024 was welcome.  However, there are practical issues arising which render the participation exemption inoperable for many taxpayers. Therefore, these issues must be resolved for Ireland’s continued attractiveness as a jurisdiction from which to make and hold investments.  PwC emphasises the importance of a simple and straightforward dividend participation regime so that it is at least as attractive as Ireland’s competitor jurisdictions. 

PwC welcomes the recently announced public consultation of the R&D tax credit enabling a wider array of foreign investments and strengthen our standing as a dynamic hub for innovation.  PwC recommends an increase in the rate of the credit from 30% to 35% to help keep Ireland at the forefront of locations in attracting R&D investment.  In addition, an increased rate on incremental R&D expenditure incurred would be a good economic driver for additional R&D activities and expenditure. 

Urgent efforts to reduce the complexity of Ireland’s tax regime 

Simplifying the tax code and decreasing the complexity of tax compliance are critical to maintaining Ireland's competitiveness.  For example, the Corporation Tax Return has grown to 62 pages at the end of 2024 from 22 pages in 2010.  PwC’s Submission advocates for the introduction of a 'Tax Simplification Roadmap” to provide a clear, long-term plan for tax simplification.  This includes urgent efforts to reduce the complexity of Ireland’s interest regime.  As mentioned above, although a welcome step towards simplification, the participation exemption for dividends remains largely unworkable at present.  Furthermore, the introduction of a participation exemption for branch profits would significantly streamline Ireland’s tax code and bolster our international reputation as an international investment location.  

In addition, Ireland has an array of pro-enterprise tax reliefs that bolster our competitive offering on the international stage.  However, the complexity of the tax code means that the full potential of these key reliefs is not being realised. For example, the difficulty in claiming the R&D tax credit and the Employment Investment Incentive Scheme (EIIS) continues to be a significant barrier for small and micro businesses.  PwC also recommends a shift in annual reporting requirements for employers (ERR), rather than real-time, to reduce onerous compliance obligations. 

Accelerate tax incentives to support Ireland’s energy transition 

PwC's Submission highlights the urgent need to accelerate Ireland’s energy transition and decarbonisation by boosting investment in renewable infrastructure, grid capacity and strengthening green supply chains.  PwC advocates for more targeted tax policy incentives which provide upfront relief and a more attractive business case for investment is required to facilitate this transition.  For example, tax incentives that offset the higher upfront costs of low-carbon materials for key public infrastructure projects, alongside initiatives to develop green skills and enable the advancement of key sectors such as offshore wind. In addition, diversifying the accelerated capital allowances regime for energy efficient equipment (EEE) beyond December 2025 needs consideration.

To promote the circular economy in the food/agricultural sector, introduce a specific corporate tax deduction for the cost of food donated to food banks that are registered charities.  

Paraic Burke concluded: “The global environment is facing significant upheaval following the new US Administration’s rejection of the OECD Global Tax Deal.  The US stance 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, remaining nimble and engaged at the OECD and EU level with respect to Pillar Two are crucial to maintaining Ireland's competitiveness.  PwC encourages Government to engage at both OECD and EU level with respect to any Pillar Two discussions and to react quickly to introduce any proposed changes to ensure Ireland is not competitively disadvantaged if it comes to any Pillar Two changes.”

Notes to the editor

Summary of proposals 

Housing 

• Remove RZLT deferral clawback for forward fund transactions (where the land is being sold by a developer, and the same developer is being engaged by the purchaser to develop the property). 

• Introduce RZLT exemptions for sites without planning permission or awaiting planning decisions. 

• Extend the Stamp Duty Residential Rebate scheme beyond December 2025. 

• Reduce stamp duty rates for energy-efficient homes. 

• Lower CGT on retrofitted investment properties to incentivise upgrades. 

• Allow REITs to issue shares in lieu of cash dividends. 

• Extend the reinvestment period for property disposal proceeds. 

• Introduce a temporary reduction in VAT for new, affordable housing for first-time buyers.

Private Business

• Reduce the CGT rate of 33% to 20% to encourage capital transactions. 

• Treat the exit of a shareholder (share buyback) as a CGT event. 

• Treat surplus cash as a ‘qualifying asset’ for CAT Business Relief. 

• Reduce tax burdens on businesses providing accommodation to employees (BIK/CAT relief / 12.5% rate for rental income and not surchargeable for Close Company Surcharge). 

• Simplify share-based remuneration and align RSU taxation with international standards. 

• Reform the taxation of Employee Ownership Trusts (EOTs) – consider matching treatment of UK. 

• KEEP: penalise late filings, don’t deny relief. 

• Increase CAT thresholds, CAT small gift exemption and CGT annual exemption to align with inflation. Increase small benefit exemption amount and allow more than five benefits a year. 

• Review and modernize the close company surcharge regime. 

• Revenue currently has 4 years to query / challenge a tax return. Introduce elective regime allowing taxpayers to give details of material transactions but reduce Revenue’s review period to 1 year.

Financial Services

Asset and Wealth Management 

• Allow S110 companies to deduct foreign withholding tax where no credit is available. 

• Consult on Funds 2030 recommendations and legislate quickly. 

• Further engagement on legislative changes to facilitate the tokenisation of investment funds. 

• Simplification measures for Irish Limited Partnership (ILP) regime.  

• Enhancement of holding company regime for "green" investments.  

• Implementation of Fund 2030 tax recommendations to encourage retail investor participation. 

• Reform ETF taxation - amend deemed disposal rules and align rates of Life Assurance Exit Tax and Investment Undertakings Tax with CGT rate. 

Sustainable Finance 

• Introduce tax incentives for investments in environmentally positive projects/funds. 

• Create tax credits for asset managers of Article 9 Funds (sustainable funds). 

• Link incentives to Greenhouse Gases emissions saved and green job creation. 

Aviation Finance 

• Tax credits for sustainable aviation fuel (SAF) tech developers, distributors and manufacturers. 

• Expand participation exemption to pre-trading SAF projects. Fast-track grant funding for SAF. 

• Expansion of accelerated capital allowances regime. 

• Simplify tax regime for aviation section (deductions, Section 840A). 

Banking and Insurance

• Removal of overlapping or redundant domestic interest reporting requirements.    

• Modernisation of "bond washing" legislation. 

• Introduce branch participation exemption. 

Fintech 

• Implementation of specific action measures specified in the Update to Ireland's ‘Finance Action Plan’. 

Dividend PE

• Address issues to ensure regime is at least as attractive as Ireland’s competitor jurisdictions. 

FDI

• Dividend PE: Addressing concerns, such as the below, which leave the PE largely unworkable at present and provide clarity on certain items.  

• The five-year look back rule creates uncertainty and complexity, making the exemption unavailable for many taxpayers and requiring significant work to claim the exemption. 

• The definition of 'relevant subsidiary' is problematic and can disqualify subsidiaries based on past acquisitions or mergers involving non-relevant territories, even if these do not impact the distribution. Need to amend the definition to include Ireland. 

• The interaction between legislation for offshore funds and the PE is overly complex and means distributions on shareholdings of between 5% - 50% may not qualify in some situations. 

• Enhance the R&D credit: increase the rate from 30% to 35%, increase rate on incremental R&D expenditure incurred. 

• Attract AI investments:  AI companies avail of 100% rate of capital allowances in the initial investment year, extend/improve SARP relief for skilled workers. 

• Introduce a refundable tax credit for brand marketing and protection expenditures to encourage companies to locate their brand IP in Ireland.  

• Participation exemption for disposals does not apply to ‘deemed disposals’ under Exit Tax provisions, and this policy decision should be reconsidered to maintain competitiveness. 

• Prioritise tax simplification: introduce branch profit participation exemption, reform interest provisions and swiftly implement any proposed EU/ATAD changes. 

Pillar Two

• The new US Administration’s rejection of the OECD Global Minimum Tax (GMT) is creating uncertainty for the global implementation of Pillar Two, especially in the EU, and raise the risk of US retaliatory measures that could harm global trade and economic stability. 

• Ireland must stay agile and advocate for solutions that maximise Ireland and the EU’s competitiveness at OECD/EU level regarding any proposed changes to the GMT. 

• Irish policymakers must stay agile and advocate for Irish and EU competitiveness at OECD/EU level.

Simplification of the tax code

• Introduce a clear, long-term plan for tax simplification. 

• Make R&D tax credits and EIIS more accessible to SMEs by reducing administrative burdens. 

• Review the practicality of conditions required to meet important reliefs such as Entrepreneur relief. 

• Alter the Enhanced Reporting Requirement (ERR) to an annual rather than real-time requirement. 

• Introduce shorter, simpler tax returns where possible e.g. Corporation Tax Form CT1 which has tripled in recent years. 

• Expand the geographic scope for dividend PE beyond EU/EEA and double tax treaty countries. 

• Introduce a branch exemption and align to that contained in Pillar Two legislation.  

• Overhaul interest deductibility rules to reduce complexity.

Energy transition 

• Tax deduction to fully or partially offset the higher upfront cost of using low carbon materials. 

• Extra corporate tax deduction for upskilling supply chain workers in renewables. 

• Tax reliefs for investment into companies carrying on qualifying renewable energy activities and the supporting supply chain.  

• Extend and expand accelerated capital allowances for energy efficient equipment. 

• Introduce corporate tax deduction for the cost of food donated to food banks that are registered charities and adapt VAT rules to alleviate VAT cost.