Since joining the European Economic Community in 1973, Ireland has developed a small, open, pro-business economy which is seen as an excellent gateway into the European market and beyond, particularly for North American-based companies. There are many reasons for Ireland’s attraction as an FDI location. In addition to being an English-speaking, EU and Eurozone member with a common law-based system of law, Ireland offers a competitive physical, regulatory and commercial framework within which to do business. Ireland’s continued EU membership also offers the benefit of free movement of goods, people and capital within the EU area to companies which have established operations there.

For a long time, one of the main drivers of attracting FDI into Ireland has been its attractive tax offering, including the corporate tax incentives that have been a cornerstone of Ireland’s strategy to encourage inward investment into the country. While this tax offering with the above factors leaves Ireland ideally placed to provide a low corporation tax rate profit centre for the European/EMEA operations of multinational companies, more needs to be done to safeguard against the background of looming trade and tariff wars as well as other external pressures for the Irish economy.

Current FDI tax offering
There are a number of aspects of the Irish tax system which means that multinationals can avail of numerous tax benefits by doing business in Ireland.

Low corporate tax rate
One of the primary tax benefits of doing business in Ireland is our standard corporation tax rate of 12.5%. This low rate applies to all trading income, whereas non-trading income (broadly equivalent to passive income) is generally taxable at 25%. Multinationals can avail of the possibilities presented by this low corporate tax rate to unbundle the traditional value chain and locate appropriate profit-generating functions in Ireland, including IP exploitation, financial activities (such as cash management, banking, insurance and risk management) and research and development activities. Whilst Ireland introduced the minimum effective corporation tax rate of 15% with effect from last year, the 12.5% rate will continue to apply to the vast majority of businesses operating in Ireland.

Attractive holding company regime
Ireland is one of the most attractive jurisdictions in which to establish holding companies and headquarter companies. In addition to the low corporate tax rate, a capital gains tax exemption can apply on the disposal of subsidiaries whether resident in or outside of Ireland. Furthermore, a participation exemption from corporation tax in respect of certain foreign dividends was introduced since the start of 2025 which, together with the absence of any thin capitalisation rules and the application of limited controlled foreign company rules, further bolsters Ireland’s attractiveness as a holding company jurisdiction.

Favourable intellectual property regime
For decades now, the world’s leading technology, pharma, life sciences and fintech companies have established operations in Ireland for their businesses. The presence of these leading companies has led to the development of a sophisticated business environment and access to the requisite specialist staff, know-how and investment for such businesses. Ireland offers substantial tax benefits to companies exploiting intellectual property (IP) rights, including the availability of capital allowances on expenditure incurred on the acquisition of IP, the research and development (R&D) tax credit, the Knowledge Development Box (KDB) and broad withholding tax and stamp duty exemptions.

Other benefits - Unlike many other low-tax jurisdictions, Ireland has a wide tax treaty network, having agreed tax treaties with 78 countries, of which 75 are currently in force. The Irish tax system also offers beneficial tax treatment (known as the ‘remittance’ basis of taxation) to non-Irish domiciled individuals based in Ireland in respect of non-Irish investment income and gains. This means that individuals who come to Ireland to work but are not Irish domiciled can remain exempt from Irish tax on such income and gains earned provided they do not remit such income or gains into Ireland. Also, Ireland operates a number of special employee tax incentives which may be attractive for multinationals looking to invest there. This includes the Special Assignee Relief Programme (SARP) which provides significant tax benefits for certain executives working in the EU/EEA or a country with which Ireland has agreed a double tax treaty or tax information exchange agreement who are seconded to work in Ireland. It also includes the Foreign Earnings Deduction which affords a valuable tax deduction for Irish residents who are required to work abroad in certain countries.


Enhancements to Ireland’s tax offering – 2025 and beyond
In order for Ireland to retain its competitive edge in the FDI space, it must continually seek to enhance its tax system and the tax benefits of doing business in Ireland. While certain measures implemented during 2024 and earlier years represented a step in the right direction, the following are some key areas where there is further scope to make improvements both during 2025 and beyond:

Simplification of current tax laws
While not unique to Ireland, there is a growing need to simplify the Irish tax code and reduce tax compliance burdens on businesses. The current position has been exacerbated by a number of legislative changes over the past decade, primarily driven by Ireland’s OECD and EU commitments, which often resulted in a new set of rules being overlayed on existing (and often complex) ones. The review of Ireland’s interest regime by the Department of Finance and Revenue, including the operation of the Interest Limitation Rule, is a positive example of potential simplification of tax rules during 2025, with the public consultation process having concluded at the end of January. Revenue has also been taking steps to modernise Ireland’s VAT administration, most recently publishing its key findings in June last year following a separate public consultation.

Participation tax exemption
A participation exemption from corporation tax applies from this year in respect of the receipt of foreign dividends from EU/EEA or tax treaty resident companies. While the exemption now represents a vital cog in Ireland’s holding company regime and means that Ireland should no longer be an outlier compared with its EU and OECD counterparts, it is expected that there will be further engagement during 2025 to extend the geographical scope of the exemption to non-EU/EEA/treaty resident companies. It is also hoped that the development of a separate participation exemption in relation to foreign branch profits will gather pace during 2025 following a commitment by the Minister for Finance in his Budget 2025 speech last October.

Improvements to R&D incentive regimes – The R&D tax credit (and, to a lesser extent the Knowledge Development Box) represents an important part of Ireland’s corporate tax offering aimed at attracting inward investment. The recent changes to the R&D tax credit, including during 2023 to align the regime with current international norms and increases last year to the rate of the relief and amount of the first year payment threshold, were broadly welcomed. However, with many countries considering the improvement or introduction of new parts to their own R&D incentives, Ireland must ensure that the operation of the R&D tax credit regime is continually reviewed and reinforced to ensure that it can remain best in class internationally.

Double Tax Treaty network
Whilst Ireland boasts an impressive double tax treaty network, continued focus is required to expand and enhance that network. To its credit, the Irish Government has been proactive in this area. During 2024, double tax treaties were signed with both Oman and Liechtenstein (in the former case, the treaty came into force in December and came into effect in January).

Conclusion
Ireland is a first-choice low tax platform for international investment. A large number of multinational groups (especially North American-based multinational groups) have already based significant operations in Ireland. In the context of increased scrutiny of tax haven jurisdictions, Ireland, as an onshore English-speaking, EU jurisdiction and Eurozone member with the necessary infrastructure to support profit-generating activities, is ideally placed as a gateway to do business both in Europe and beyond. Corporate tax incentives have been the foundation of Ireland’s strategy to encourage inward investment into Ireland. While Ireland has been keen to implement tax policies and regimes aimed at attracting and retaining inward investment, it must continue to review and enhance its tax offering to ensure that Ireland remains one of the pre-eminent countries in and from which to do business in Europe and beyond.