Finance Bill 2025 – Business Taxes

Finance Bill 2025 introduces several changes which seek to promote investment in Ireland and enhance Ireland’s tax competitiveness. Our Tax team considers some of the key updates relevant to businesses.

Participation exemption for foreign dividends

Ireland introduced a participation exemption in Finance Act 2024 for Irish companies in receipt of dividends from a company resident in the EU or a double tax treaty country. Finance Bill 2025 contains welcome changes to the qualifying conditions for the exemption, designed to broaden its scope and clarify when the relief is available.

The key changes include:

• Extending the definition of a relevant territory for the purposes of the exemption to:
  • Non-treaty countries, where that country operates a non-refundable withholding tax, and
  • New treaty partners from the date the treaty is signed, and with a lookback for the previous three years from signature
• Reducing the period for which the paying subsidiary must be resident in a relevant territory before the dividend is paid from five years to three years
• Clarifying when the exemption may be availed of in circumstances where the paying company:
  • Acquired shares in another company
  • Moved its residence from Ireland, or
  • Was involved in certain merger and acquisition activity with an Irish company

The existing regime was seen to be more restrictive and less favourable than some participation regimes available in other jurisdictions. It is expected that these changes will enhance the attractiveness of Ireland as a holding company location.

R&D tax credit

The research and development (R&D) tax credit provides Irish businesses with a refundable corporation tax credit for qualifying expenditure on R&D activities. The Bill contains several enhancements to Ireland’s R&D tax credits as follows:

• An increase in the rate of the R&D tax credit from 30% to 35% of qualifying R&D expenditure
• An increase in the maximum first year refund from €75,000 to €87,500, and
• 100% of an employee’s emoluments will be considered as qualifying R&D expenditure where at least 95% of that employee’s time is spent on qualifying R&D activities, and the expenditure is not counted for tax relief purposes by the company in any other country

These amendments apply to accounting periods ending on or after 23 December 2026.

The Bill also clarifies that costs incurred on the construction of a laboratory for use in the carrying out of R&D activities will constitute “qualifying building expenditure”, excluding any office element.

It is hoped that these enhancements to the regime will result in an uptick in companies choosing to undertake their R&D and innovation in Ireland.

Capital allowances on intangible assets

A company can claim capital allowances on the cost of acquiring intellectual property assets for use in its trade. Generally, the allowances may only be offset against trading income generated from those assets. The maximum deduction allowed in any year is capped at a maximum of 80% of relevant trading profits in the accounting period. Any unused allowances or allowances in excess of the cap may be carried forward to future accounting periods.

The Bill introduces amendments aimed at ensuring that balancing allowances, which arise on certain events, such as the disposal or transfer of an asset, are included in the 80% cap. This amendment applies to any balancing allowance triggered on or after 8 October 2025.

The Bill also introduces several clarifications including that:

• Capital allowances may be claimed by a transferee on the acquisition of intellectual property on a qualifying group reconstruction or intra-group transfer of assets, where the acquisition occurs on a transfer of a trade between companies within 75% common ownership, and
• Where a qualifying transfer of a trade occurs, the successor company is entitled to claim the excess capital allowances and excess interest brought forward by the predecessor company

These technical amendments clarify the availability of capital allowances in specific circumstances and the interaction of the rules with other reconstruction reliefs. They take effect from 1 January 2026.

Stamp duty exemption

Finance Bill 2025 proposes replacing the current exemption from stamp duty on a transfer of shares or other securities listed on the Euronext Growth Market, i.e. Euronext Dublin, with a broader exemption.

The new exemption will apply to the transfer of stocks or marketable securities in an Irish registered company admitted to trading on:

• any EU regulated market or a multilateral trading facility, or
• any equivalent market or multi trading facility outside the EU

subject to having a market capitalisation below €1 billion, as set out below.

The exemption will apply where:

• The closing market capitalisation of the company was below €1 billion on 1 December of the previous year, or
• Where the stocks or securities are admitted to trading after 1 December in the previous year, the expected market capitalisation on admission to the market is below €1 billion

The company or the operator of the relevant market must notify the Revenue Commissioners of the applicable market capitalisation in the prescribed form and must update this notification on an annual basis. Once these requirements are satisfied, the exemption should apply to a transfer executed in the period beginning on the later of (a) 14 days after the notification date, or (b) 1 January of the following year, and ending on 31 December of that following year.

It is proposed that this new exemption will apply for five years, from 1 January 2026 until 31 December 2030. The change should offer a choice to qualifying companies as to where they list their stock and reduce the cost of investment in Irish registered companies qualifying for this exemption.

Interest limitation rule update for large-scale assets

The Bill contains proposals for updating the definition of a large-scale asset for the purposes of the interest limitation rule (ILR) to include references to certain projects which have been granted planning permission under the recent Planning and Development Act 2024. These include electricity transmission infrastructure developments, strategic gas infrastructure developments, strategic infrastructure developments and large-scale residential developments as defined in the 2024 Act. This update will be effective once a Ministerial Order is passed.

Country-by-country reporting

Finance Bill 2025 contains proposals to amend the county-by-country (CbC) reporting by reference to the updated OECD guidance published in May 2024. It provides that the CbC reporting legislation is to be interpreted, and CbC reports are to be completed, in accordance with that guidance. It also proposes amendments to the legislation for the purposes of applying the €750 million threshold which is relevant for determining which groups are within the scope of the reporting requirement.

Pillar Two

The Bill proposes amendments to the Pillar Two legislation to incorporate further OECD administrative guidance and to provide for EU and OECD exchange of information requirements. Multinational groups in scope of Pillar Two rules should review the updates to consider whether they may be impacted by any of the changes.

Other Finance Bill 2025 insights

The content of this article is provided for information purposes only and does not constitute legal or other advice.