Individual investment account
The Bill provides for the introduction of the new individual investment account (IIA). The IIA is designed to facilitate tax-efficient investment by Irish individuals and allows Irish individuals to gain exposure to a range of financial instruments through certain authorised providers. The IIA regime applies a 1% flat rate tax, called investment account tax, to amounts held in IIAs in excess of €50,000.
At a high level, the IIA will operate as follows:
- An IIA can be held by an Irish resident individual over 18 years old holding a PPS Number and will be limited to one IIA per individual.
- Individuals may contribute up to €12,000 per year to an IIA.
- IIAs will be operated by ‘qualifying account providers' that are registered with Revenue. Qualifying account providers will include:
- Banks
- Regulated fund managers
- MiFID investment firms, and
- Insurance companies.
- IIAs may be used to invest in the following assets:
- Listed shares
- Listed bonds
- Units in UCITS funds, and
- Insurance-based investment products.
- It is noteworthy that derivatives, crypto-assets and other complex products are excluded.
- The 1% investment account tax applies to the daily average balance of the IIA above €50,000 in a given year. The tax only applies to the amounts in excess of €50,000. It can also apply where contributions over €12,000 are made to an IIA in a given year.
Investment account tax will be a final tax liability, with the relevant qualifying account provider operating the tax. Individual account holders will therefore not pay any further tax on income or gains arising from an IIA. The Bill also provides amendments that disapply various withholding tax rules for investments held in an IIA. These include interest withholding tax, dividend withholding tax and exit tax for Irish funds.
The rules are subject to commencement order by the Minister for Finance, with the current intention being for IIAs to be introduced and made available for investment from 1 July 2027. The rules are detailed and clearly intended to provide sufficient clarity for intending qualifying account providers looking to prepare for the introduction of IIAs.
Interest as a charge
The Bill makes a number of amendments to simplify and update the ‘interest as a charge’ provisions in sections 247 and 249 of the Taxes Consolidation Act 1997 (TCA). By way of background, these provisions allow tax relief for interest paid on borrowings to fund investments in certain companies. This regime was noted as a key area of focus as part of the Government’s 2024 consultation on the Tax Treatment of Interest in Ireland.
The most notable updates to the ‘interest as a charge’ provisions include the following:
- The common director requirement has been removed for accounting periods beginning on or after 1 January 2027.
- For new loans made on or after 1 January 2027, the wording requiring a loan ‘to defray money applied’ for a qualifying purpose has been updated so that a loan should instead be ‘used’ for a qualifying purpose. This reflects a more straightforward approach to funding requirements for section 247 TCA, which is a welcome development.
- Foreign bodies corporate that are substantially similar to Irish partnerships are no longer considered to be ‘companies’ for the purposes of the 'interest as a charge' provisions.
- The recovery of capital rules have been updated to allow interest relief to continue to apply where recovered amounts are:
- re-applied to make a new qualifying investment within six months, or
- used to repay any other loan to which section 247 TCA applies.
Pillar Two updates
The Bill provides updates to the Pillar Two rules to implement the OECD Side-by-Side package. The Side-by-Side package was agreed in January 2026 to address principally US concerns with the Pillar Two framework. The Bill also incorporates the administrative guidance issued by the OECD in May and September 2026.
The Bill legislates for the following ‘safe harbours’ included in the OECD Side-by-Side Package:
- The Simplified ETR Safe Harbour
- The Substance-based Tax Incentive Safe Harbour
- The UPE Safe Harbour, and
- The Side-by-Side Safe Harbour.
The pre-existing Transitional Country-by-Country Reporting (CbCR) Safe Harbour has been extended to apply to fiscal years beginning on or before 31 December 2027. However, it will not apply to a fiscal year that ends after 30 June 2029.
Interest limitation rule
Some minor updates to the interest limitation rule (ILR) regime are included in the Bill. The deadlines for making specific ILR elections have been extended from the filing deadline to two years after the end of the relevant accounting period, comprising:
- The election to form or to leave an interest group, and
- The elections to apply the group ratio relief and the equity ratio relief.
This is a sensible update that allows some flexibility to correct a failure to make an appropriate ILR election by the filing deadline, for example, due to administrative oversight.
Tax rate decrease for IUT and LAET
Following reductions in last year’s Finance Bill, the exit tax rates for Irish regulated funds (IUT) and life assurance policies (LAET) have been further reduced to 35%, down from 38%, for chargeable events after 1 January 2027. Similar reductions apply in the tax rates for income and gains from ‘equivalent’ offshore funds and certain foreign life assurance policies.
Standalone rules for units of Irish funds held in clearing systems
The Bill introduces specific tax rules for Irish resident investors in Irish funds whose units are held in a clearing system, primarily ETFs. These investors are currently taxed by reference to the ‘equivalent’ offshore funds rules. The same tax rates as for other Irish funds will apply: 35% for individuals and 25% or 12.5% for corporates, with a 60% rate for ‘PPIUs’.
Tax will be applied to the relevant unitholder directly, and collected via self-assessment, rather than being withheld by the fund. This change is a welcome simplification of the tax treatment of Irish investors in ETFs. It also aligns with the Government’s objective to enable more retail investment in Ireland, as outlined in the Funds Sector 2030 report.
Bank levy extended
The bank levy has been extended for another year and will apply to in-scope banks (AIB, EBS, Bank of Ireland and PTSB) at a rate of 0.1025% on the amount of eligible deposits held by each bank at 31 December 2024.
Conclusion
The measures in Finance (No. 2) Bill 2026 that are relevant to the financial services sector aim to support retail investment and to simplify aspects of the taxation of interest. The new IIA regime offers significant opportunities for qualifying account providers. Businesses should assess how the proposed changes affect their operations as the Bill progresses.
For more information and expert advice, contact our Tax team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.