Finance Bill 2025 Summary

The Bill implements the taxation changes announced under Budget 2026 as well as introducing administrative and technical changes to the Irish tax code.

The Bill has made changes in respect of Income Tax, Corporation Tax, Capital Gains Tax, Value-Added Tax and Stamp Duty. Most of the changes being implemented are extensions of existing schemes or amendments to requirements or criteria of existing schemes, with the financial thresholds applicable to certain schemes having also been updated.

Set out below is a brief overview of the key tax highlights arising from the Bill.

Tax Highlights

Income Tax

• The legislation introduces Chapter 2E into Part 30 of the Taxes Consolidation Act 1997 (the “TCA”) setting out the taxation and relief rules for the Automatic Enrolment Retirement Savings Scheme (“AE”), which provides the legislative basis for AE. Under Chapter 2E, employer contributions to AE will be exempt from tax, income and gains of AE funds held by an AE provider will be exempt from tax, and amounts paid over and above any tax-free lump sum from the fund will be subject to tax.
• The TCA is to be amended to provide an extension of the Key Employee Engagement Programme (“KEEP”) until 31 December 2028. The extension of KEEP is subject to commencement order, as the measure is a notified State Aid and must be approved by the European Commission prior to commencement.
• The Special Assignee Relief Programme (“SARP”) is being extended for a further 5 years until 31 December 2030. An employee who first arrives in the State on or after 1 January 2026 will be required to have an annualised base salary figure of not less than €125,000 in the year of their arrival to qualify for the relief. The section is also amended to provide that the employee will qualify for the relief in circumstances where the employer certification is not made within 90 days of their arrival in the State but is made within 180 days.

Income Tax, Corporation Tax and Capital Gains Tax

• The scheme which provides for the acceleration of wear and tear allowances on capital expenditure incurred on certain energy-efficient equipment used for the purposes of carrying on a trade is to be extended to 31 December 2030.
• Several amendments have been made to the Living City Initiative (“LCI”):
  • Extension of the LCI to 31 December 2030.
  • The pre-1915 building age requirement that applied for owner occupier and rented residential relief is amended to provide that residential premises built prior to 1975 will be eligible for relief in respect of qualifying or eligible expenditure incurred on or after 1 January 2026.
  • The commercial premises and rented residential elements of the LCI are amended to provide that:
    • relief for qualifying or eligible expenditure incurred on or after 1 January 2026 is allowed over two years at a rate of 50 per cent per annum;
    • the period over which unused relief may be carried forward is extended from seven years to ten years; and
    • the restriction which requires three times the amount of a grant received or receivable to be deducted from qualifying or eligible expenditure is removed.
• A new section 222A has been inserted into the TCA to provide for a corporation tax exemption for rental income arising from dwellings designated as cost rental under Part 3 of the Affordable Housing Act 2021. The exemption will apply to rental income arising from properties designated as cost rental dwellings by the Minister for Housing, Local Government and Heritage from 8 October 2025 onwards. Income arising from properties that were designated as cost rental dwelling before that date will not qualify for the exemption.
• Sections 766, 766A, 766C and 766D of the TCA which provide for the Research and Development (“R&D”) corporation tax credit have been amended. The amendments are as follows:
  • The rate of the R&D corporation tax credit is increased from 30 per cent to 35 per cent;
  • The amount of the first instalment, which is available to claimant companies in full in year one, is increased from €75,000 to €87,500;
  • A simplification measure is being regarding the amount of time an employee spends dedicated to qualifying R&D activities. Where at least 95 per cent of an R&D employee’s time is spent on qualifying R&D activities, then 100 per cent of that employee’s emoluments will be deemed to have been incurred wholly and exclusively in the carrying on by the company of R&D activities; and
  • Expenditure incurred by a company on the construction of a qualifying building shall include expenditure incurred by the company on the construction of a laboratory for use in the carrying on of R&D activities.
• Section 1009A has been inserted into Part 43 of the TCA. This new section provides that a foreign body corporate and its members will be chargeable to tax on the basis that the foreign body corporate is a partnership, where it is substantially similar to an Irish partnership.
• With effect from 1 January 2026, there will be a reduction in the rate of tax from 41 per cent to 38 per cent on income and gains from domestic life assurance policies, certain foreign life policies, Irish domiciled investment funds and equivalent offshore investment funds in other EU Member States, EEA States and OECD countries with which Ireland has double taxation agreements.
• Amendments to the TCA have been made to allow dividends to be paid free from dividend withholding tax to an investment limited partnership or to an equivalent partnership authorised in the EEA, where the partners are beneficially entitled to not less than 51 per cent of the ordinary share capital of the Irish company making the distribution. Provision is also made to simplify the filing requirements of an investment limited partnership.
• Amendments have been made to section 410 of the TCA which provides that certain payments between companies that are members of a group may be made without deduction of tax provided that certain conditions are met. One of the conditions is that it is necessary for the companies to form part of a 51 per cent group. In determining whether a group exists, it is currently necessary to disregard any share capital held either directly or indirectly in a company not resident in a relevant Member State (which includes Member States of the EU, Member States of the EEA with which Ireland has a double tax treaty and the UK). The relief is being extended to include countries with which Ireland has a double taxation agreement.

Corporation Tax

• Section 43 amends section 481 of the TCA, which provides for the film corporation tax credit, introducing an enhanced tax credit of 40 per cent for qualifying visual effects projects. The enhanced credit will be available to section 481 projects which incur eligible expenditure on relevant visual effects work in the State of not less than €1,000,000. For films that qualify for the enhanced rate, the credit will be calculated on completion at the rate of 40 per cent up to a maximum of €10,000,000 of expenditure. Eligible expenditure in excess of €10,000,000 will qualify for the section 481 tax credit at the standard credit rate of 32 per cent. This section is subject to a commencement order as the amendment requires the approval of the European Commission.
• Section 45 provides for a number of amendments to section 831B of the TCA in relation to the participation exemption for certain foreign distributions.
  • Distributions from a territory with which Ireland does not have a double tax agreement will be within scope of the exemption where non-refundable withholding tax has been paid on the full amount of the distribution;
  • A company resident in a territory with which Ireland has newly signed a double tax agreement will be able to qualify as a relevant subsidiary from the date of signature.
  • The definitions of “reference period” and “relevant period” will be reduced from five years to three years, reducing the period in which a company must be resident in a relevant territory prior to making a distribution in scope of the exemption.
  • A distribution will not be excluded from scope as a result of it being deductible for the purposes of calculating a tax similar to the close company surcharge in section 440 of the TCA.
  • The residence of a company will be determined under the terms of a relevant territory’s double tax agreement with Ireland in cases where the domestic law of the territory does not determine company residence.

Capital Gains Tax

• Section 597AA of the TCA has been amended to increase the lifetime limit for revised entrepreneur relief from €1 million to €1.5 million with effect from 1 January 2026.

Value-Added Tax (“VAT”)

• The 9 per cent rate of VAT on the supply of gas and electricity has been extended until 31 December 2030.
• Section 67 amends section 46 of, and Schedule 3 to, the VATCA 2010 to provide for a 9 per cent rate of VAT on the sale of certain apartments as part of a social policy. The 9 per cent rate comes into effect on 8 October 2025 until 31 December 2030.
• Section 68 amends section 46 of the VATCA 2010 to provide, from 1 July 2026, for the application of the 9 per cent rate of VAT to the supply of hairdressing services, and food and drink supplied in the hospitality sector, excluding alcoholic beverages.

Stamp Duties

• Section 83D of the SDCA 1999, which provides for a partial repayment of Stamp Duty paid on a conveyance or transfer of land where the land is subsequently developed for residential purposes, has been amended. Where the conditions of the scheme are met, the amount to be repaid is the difference between Stamp Duty paid at the rate of 7.5 per cent on the acquisition of the land and the amount that would have been paid had the rate of 2 per cent applied. Currently, section 83D provides that construction operations on the land must commence pursuant to a commencement notice within 30 months of the date of execution of the conveyance or transfer and on or before 31 December 2025. Where a development is carried out in phases, either a partial repayment can be claimed in respect of each phase of the development, or a full repayment can be claimed after the entire development has been completed. This section proposes to make the following changes to the repayment scheme, which will apply to repayments claimed under section 83D once Finance Bill 2025 is enacted: 
  • extend to 31 December 2030 the latest date by which construction operations must commence;
  • extend the two time limits that apply (acquisition to commencement, and commencement to completion) from 30 months to 36 months for large-scale residential developments (“LRDs”);
  • allow for a full repayment of Stamp Duty to be claimed in respect of a multi-phase development once the first phase commences;
  • provide that Revenue will be precluded from repaying Stamp Duty if any of the conditions to avoid a clawback of a repayment are not met; and
  • provide that where a residential development is carried out in phases and a repayment is claimed in respect of the entire residential development, the last phase must be completed within 30 months of the date of the commencement notice related to that phase to avoid a clawback (36 months in the case of LRDs).
• Section 79 also proposes to insert a new section 86B in the SDCA 1999. The new section provides for an exemption from Stamp Duty on a conveyance or transfer of stocks or marketable securities where the securities are admitted to trading on a “relevant market” and the closing market capitalisation of the company that issued the securities was below €1 billion on 1 December in the previous year. In a case where the securities were admitted to trading after 1 December in the previous year, the exemption will apply if the expected market capitalisation of the company upon admission to the relevant market was below €1 billion. The exemption will not apply unless the operator of the relevant market or the company that issued the securities makes a valid notification to the Revenue Commissioners of the applicable market capitalisation.

Should you have any queries in relation to the Finance Bill 2025, or the potential implications of same for your clients, please do not hesitate to contact a member of the Tax team.