Michelle Adams, Director, Financial Services Tax, BDO: The Budget and Finance Bill should prioritise measures that strengthen Ireland’s competitiveness, support sustainable economic growth, and enhance Ireland’s attractiveness for investment. In that context, we recommend the Minister for Finance consider the following key measures:

Extend the participation exemption to foreign branch income: Finance Act 2024 introduced a participation exemption for foreign dividends, however, a similar exemption regime for foreign branches was not introduced at the time. Ireland currently applies a tax-and-credit regime to foreign branch income, which can create significant administrative burden for taxpayers and may reduce Ireland’s competitiveness for foreign direct investment (FDI). Introducing an exemption for foreign branch income should therefore be a high priority in the forthcoming Budget.

Taxation measures to encourage retail investment: Despite being a leading investment funds jurisdiction, participation by Irish retail investors remains chronically low. Last year’s Finance Act reduced the IUT and LAET rates from 41% to 38%, and while this is a welcome step, we believe further reduction is warranted to improve Ireland’s competitiveness and better align these rates with the current CGT rate of 33%. Furthermore, the removal of the 8-year deemed disposal requirement for investment funds and life assurance products has been a long-standing recommendation. Eliminating this rule would reduce complexity, improve investor outcomes, and strengthen Ireland’s position as a jurisdiction that supports long-term investment. The anticipated introduction of a Savings and Investment Account in this year’s Budget would be a positive development. This measure has the potential to encourage household savings, support greater retail participation in investment, and contribute to broader domestic economic growth. It is, however, important that the new savings account is tax incentivised, with low tax administration and no taxation on deemed or assumed profits or gains.

Continue to enhance the R&D tax credit: The R&D tax credit remains a critical tool in sustaining Ireland’s innovation economy and attracting investment. It should continue to be enhanced and kept competitive internationally. One targeted improvement would be to amend the legislation to allow certain related-party expenditure where the Irish entity is the owner of the internally generated intellectual property.
Reduce CGT rate: Ireland’s CGT rate of 33% remains among the highest in Europe. For several years, stakeholders have called for a reduction, commonly referenced as a move towards 20%, to better support entrepreneurship, encourage reinvestment, and facilitate the transfer of businesses to the next generation. The current rate can act as a disincentive to disposals and business succession planning.

While there are many additional measures that could be considered as part of the Budget and Finance Bill, addressing the above would be well received by stakeholders and would represent meaningful progress in enhancing Ireland’s competitiveness and supporting long-term growth.

Deirdre Barnicle, Partner, McCann FitzGerald: In a climate of increased protectionism and international competition for FDI, changes to the tax regime are required not only to boost Ireland’s standing, but also to continue to retain its current position as a key location for global business activity.

This is particularly evident with the R&D tax credit, a key pillar of Ireland’s regime that supports 1,500 companies annually. Ireland currently ranks among the most attractive OECD countries for R&D incentives with the highest funding share of GDP contributed and the lowest effective average tax rate. However, as the Irish economy has developed, the implementation of the regime should be refined alongside it to increase collaboration, foster network dependencies and signal to businesses that Ireland is committed to continuing its support for research and development. The removal of the restrictions on outsourced related party R&D, the cap on subcontracting, and the cap on the application of the credit to the universities and third level institutions would facilitate this. In this regard, the commitment in the R&D Compass published in April 2026 to conduct an in-depth review of sub-contracting in the context of the regime is welcomed.

Similarly, there are opportunities to improve the efficiency of the participation exemption. Due to the inherently international application of the exemption, asymmetries in legal frameworks across the world can create unnecessary difficulties, for example, the requirement for distributions to be paid out of profits may be incompatible with certain international company law frameworks. The “qualifying participation” rules should also be aligned with the substantial shareholding exemption for CGT to reduce complexity.

Larger changes are needed in the taxation regime for Irish authorised funds to bring it into step with international norms. Helpful recommendations were made in the Funds Sector 2030 Report that should be implemented. In particular, equalising the rate of investment undertaking tax with CGT and the removal of the deemed disposal rule which triggers an exit tax for Irish investors on the eighth anniversary of their investment would bring the taxation of collective investments in line with direct investments and support Ireland’s aim to be a key jurisdiction for the industry.

This article appeared in the May 2026 edition of the Irish Tax Monitor.