Executive summary

The Irish Government (the Government) presented Budget 2026 (the Budget) on 7 October 2025. The Budget provided for a total package of €9.4b, which represents a significant increase in Government spending over prior years. The Finance Bill 2025 (the Bill), which will include legislation giving effect to the measures presented in the Budget, is expected to be published on Thursday 16 October.

This Alert summarizes the key elements for international investors.

Context

The Irish economy has performed quite strongly in recent years resulting in a healthy public-finances position and this is expected to continue in the near term. For example:

• Modified domestic demand¹ is forecast to grow by 3.3% for 2025 and 2.3% for 2026.²
• The rate of inflation remained stable at 2% in August and is expected to stay close to that level through 2026.³
• The Irish labor market continues to perform strongly with an increase of 63,500⁴ people in employment in comparison to this time last year. The rate of unemployment for 2025 and 2026 is forecasted to be approximately 4.6% and 4.8%, respectively.⁵
• A general government surplus of €10.2b (3% of gross national income) is expected for 2025⁶ and a surplus of €5.1b (1.4% of gross national income) is expected for 2026.
• Tax revenues for 2025 and 2026 are expected to be €106.3b and €109.2b respectively⁷ with corporate tax receipts projected to be €33.9b in 2025 and €34b in 2026.⁸
• General government debt is projected to fall from 61.7% of national income by the end of 2025 to 58.6% of national income by the end of 2026.⁹
• In July 2025, the Government updated the National Development Plan (NDP) to address the infrastructure deficit in housing, water, energy and transport. Representing the largest-ever capital investment plan for Ireland, the NDP outlines planned total expenditure of €275.4b over the next decade. Budgeted capital expenditure for 2026 is €19.1b.

However, the Government has acknowledged the uncertainty prevalent in the global economy and the aim of the Budget is to safeguard Ireland's future by improving Ireland's competitiveness for domestic and foreign investment. In that context, the Budget is built on three priorities:

• Investment in vital infrastructure
• Targeted improvements to public services
• Strengthening Ireland's economic foundations

Budget overview

The Budget provides for a total package of €9.4b, which provides for expenditure increases as follows:

The majority of current expenditure is focused on areas such as social protection, healthcare and public service pay-agreement adjustments. The capital expenditure is devoted to projects related to housing, water infrastructure, transport and electricity. Details of specific projects will be released in the coming weeks.

Key tax measures that are relevant for international investors include:

• Research and development (R&D) tax credit - The rate of the tax credit will increase from 30% to 35% and the first-year payment threshold will increase from €75k to €87.5k. The Minister of Finance (the Minister) has also committed to publishing an R&D Compass in the coming weeks that will outline further changes to the regime (e.g., outsourcing rules and qualifying expenditure definitions) and establish a roadmap for innovation supports more broadly.
• Dividend participation exemption — Changes to the exemption are expected in the Bill and include:
• Widening the scope of the exemption to include qualifying dividends from jurisdictions that apply a nonrefundable dividend withholding tax
• Reducing from five years to three years the requirement for the subsidiary company to be resident in a qualifying jurisdiction
• Clarifying that the acquisition of a shareholding is not considered a business asset for purposes of the anti-avoidance provision
• Audio-visual (AV) sector relief — The tax incentives available to the film and wider AV sector are being expanded. A new 40% corporation tax credit will be introduced for productions on relevant visual effects work, subject to a maximum expenditure limit of €10m and a minimum expenditure amount of €1m per project.
• Intellectual property (IP) amortization — If IP that qualifies for Ireland's IP amortization regime is sold or no longer used, the relief available on any balancing allowances arising will be limited by the regime's ringfencing rules and the 80% cap. These rules provide that the amount of amortization relief available in any one accounting period is limited to 80% of the tax-adjusted profits from the IP trade for that period with the excess carried forward. This provision has effect from 8 October 2025.
• Special Assignee Relief Programme (SARP) — The SARP, which provides for an income tax exemption for assignees of 30% of the relevant employment income between €100k and €1m, is being extended to 31 December 2030. However, from 1 January 2026, the minimum qualifying income will be increased to €125k for new claimants.
• Housing — Reflecting a major focus on stimulating activity and promoting investment (both domestic and international) in residential development, a number of measures were introduced, including:
• The value-added tax (VAT) rate on the supply of completed apartments been reduced from 13.5% to 9%. This reduced rate applies from 8 October 2025 to 31 December 2030.
• An enhanced corporation tax deduction of 125% is introduced for qualifying apartment construction costs up to a maximum of €50k per apartment unit.

Other key points

In addition to the above, the Minister announced the following plans.

Taxation of interest — The Budget was accompanied by an Action Plan that outlines a phased approach to modernizing the tax treatment of interest to ensure the Irish tax system remains competitive. The plan is in response to the consultation launched in September 2024.¹⁰ The first phase of the plan involves the publication of a feedback statement in November 2025 and legislation amending the regime is expected in 2026. Areas of focus are anticipated to include the following: aligning the tax treatment between trading and passive interest income, introducing a simplified test for interest deductibility and extending the scope of deductions to interest equivalent.

Funds sector — To advance the recommendations of the Funds Sector 2030 Report, a roadmap will be published in early 2026 outlining steps to simplify and modernize the tax framework for retail investment.

Withholding taxes — The Minister highlighted plans to modernize, digitalize and expand the scope of withholding taxes. A joint Department of Finance-Revenue public consultation will be launched shortly.

Infrastructure — A detailed action plan to address the current infrastructure deficit will be published in November 2025 outlining the Government's plans under the NDP to provide €275b in infrastructure expenditures over the next 10 years. The plan will also include legislative reform to simplify regulations and alleviate the administrative burden, which can affect the timely delivery of such projects.

Next steps

The Finance Bill is expected to provide further detail on the scope and implementation of the above measures. Further Tax Alerts will be issued as key developments arise. Businesses and investors should monitor developments closely to assess the potential impact on operations and investment planning.