Finance Bill 2025: Financial Services

The Finance Bill contains a number of important tax changes in the area of Financial Services. Our Tax team considers the noteworthy changes.

Investment taxes

As announced in his Budget Speech, the Minister for Finance intends to publish a roadmap early next year outlining his approach to simplify and adapt the tax framework to encourage retail investment.

In the meantime, the Bill includes provisions to reduce the tax rate on payments made from Irish funds, equivalent offshore funds (resident in certain jurisdictions), as well as Irish and foreign life assurance policies to Irish individual investors from 41% to 38%. The reduction comes into effect from 1 January 2026.

While the rate reduction is welcome, more had been hoped for in advance of Budget 2026, in particular, a rate reduction to align with the 33% rate of capital gains tax (CGT) and the abolition of the eight-year deemed disposal rule.

Gain on unit trusts

Currently, there is an exemption from CGT for gains in an unauthorised unit trust where all of the units are held by persons who are exempt from CGT, other than persons exempt on residence grounds or under a specific exemption afforded to certain unit trusts. This amendment adds a further carve out from the exemption, which applies where units are held by an investment undertaking. With this amendment, the CGT exemption for unit trusts will not apply where there are unitholders who are investment undertakings.

Dividend withholding tax to ILPs

The Irish dividend withholding tax (DWT) rules are being amended to allow investment limited partnerships (ILPs), and their equivalents authorised in an EEA State, to receive dividends from their 51% Irish subsidiaries free of DWT.

The legislation specifically provides that the exemption is subject to the defensive measures for outbound payments. Further detail on these measures can be found in our previous insight here.

This amendment removes an unnecessary friction whereby DWT was operated on dividends to ILPs, only to be refunded to investors in many cases. It was expressly sought by industry bodies and professional firms and is to be welcomed as it further enhances the attractiveness of the ILP structure for domestic and international investors. An interesting consideration in operating this exemption in practice will be the question of which foreign entities will definitely qualify as an equivalent partnership to an ILP, authorised in an EEA State.

Deductibility of interest on certain loans

Following a public consultation in January 2025 on the taxation and deductibility of interest by businesses in Ireland, the Department of Finance has published an action plan on reforming interest deductibility rules in Ireland. Accordingly, the changes to interest deductibility rules in the Bill are very limited.

The Bill does include an amendment to relax an anti-avoidance provision that denies a deduction for interest payable on intra-group borrowings to purchase assets from a connected company or to refinance those borrowings. The amendment allows an interest deduction, subject to a bona fide test, for the acquirer of an asset where:

• The seller had borrowed to acquire the asset and was entitled to a deduction or relief on those borrowings, and
• The lender is subject to tax in Ireland or an EU or double tax treaty territory on the interest income

The deduction is limited to the amount of interest that would arise on the principal outstanding on the seller’s borrowings immediately before the intra-group sale.

This amendment will be welcomed by groups who wish to transfer leveraged assets to connected companies for genuine business reasons and who were constrained by the anti-avoidance rule on those transactions. Notably, the amendment applies to asset transfers occurring on or after 1 January 2024.

Crypto-asset reporting

This measure introduces the Crypto-Asset Reporting Framework (CARF) into Irish legislation. The CARF is a new reporting framework from the OECD which provides for the automatic exchange of tax-relevant information by “crypto-asset service providers”, including:

• Centralised and certain decentralised crypto-asset exchanges
• Crypto ATM operators
• Crypto-asset brokers, dealers, and market makers, whether acting as intermediaries or principals

CARF requires reporting for:

• Exchanges between crypto-assets and fiat currencies and between different forms of crypto-assets
• Transfers of crypto-assets
• Reportable retail payment transactions above a minimum threshold

It is important to note that, unlike the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) which require the reporting of assets, CARF provides for transaction-level reporting.

The data required to be reported includes:

• User data including name, address and Tax Identification Number (TIN)
• Details of the relevant crypto-asset transacted, including the number of units and fair market value

A crypto-asset is defined as “a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions.” The definition is broadly cast, and extends to cryptocurrencies, stablecoins, derivatives issued as crypto-assets and certain non-fungible tokens (NFTs) that represent rights to value, membership, or property. Certain types of assets which are not digital representations of value are excluded. These would include, for example, a supply chain blockchain record, or a real estate ledger. Importantly, Central Bank digital currencies and eMoney are excluded from the reporting requirements.

The legislation applies to reporting periods from 1 January 2026, and it is expected that the first reports will be due from 2027.

While the OECD rules have been published since 2023, it is expected that significant work will be required by crypto-asset service providers to perform due diligence on their users, including collecting residence self-certifications and gathering required data. It will also be important for providers to ensure that their systems can generate the data in the required format and in accordance with the rules.

Foreign body corporate

The Bill introduces a new provision that partners in a foreign entity which is ‘substantially similar’ to an Irish partnership will be taxed on the same basis as if it were an Irish partnership. Essentially, this means they will be taxed on the basis of the partners’ shares of the profits and gains.

It is understood that this provision is intended to clarify the tax position, in particular, with respect to UK LLPs. However, there is some uncertainty as to how it will apply in practice and whether it could have a broader impact. Therefore, further refinements to the legislation or Revenue guidance may be required.

Qualifying fund managers

The Bill introduces a new annual reporting requirement for qualifying fund managers, or ‘QFMs’, who administer Approved Retirement Funds (ARFs).

From the year of assessment 2026 onwards, each QFM will be required to file an annual return online with Revenue within three months of the end of the tax year. The first return will therefore be due in early 2027 for the 2026 year of assessment.

The return must include detailed information regarding all ARFs administered by the QFM during the year, including but not limited to:

• The identity and residency of each ARF holder
• The date of first acquisition of the fund
• Key asset and transaction data
• Details of any distributions made during the year, and
• Any additional information that Revenue may request

Qualifying fund managers will need to review their existing systems and ability to comply with this new reporting obligation.

Other Finance Bill 2025 insights

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