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.