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Finance Bill 2025 - Corporation Tax

The Finance Bill 2025 introduces a series of targeted refinements to Ireland’s corporation tax framework. While much of the legislation consolidates measures introduced in recent years, there are important developments in areas such as R&D, international tax compliance and environmental investment. Collectively, these measures continue to strengthen Ireland’s position as a competitive jurisdiction for domestic and multinational companies.

Research and Development (R&D) Tax Credit

The Bill strengthens one of Ireland’s most valuable corporate incentives by increasing the R&D tax credit rate from 30% to 35% for accounting periods beginning on or after 1 January 2026.

The first-year refund threshold has also been increased from €75,000 to €87,500. In a further simplification, the legislation provides that an employee’s time can be treated as 100% qualifying R&D activity where at least 95% of their working time is dedicated to eligible research.

Participation Exemption

The participation exemption for foreign dividends, introduced in Finance Act 2024, is refined further in this year’s Bill to ensure it operates effectively in practice.

Key updates include:

  • A reduction in the required residency period for the distributing company from five years to three years;
  • The inclusion of distributions from non-treaty jurisdictions, where full withholding tax has been applied and is non-refundable;
  • Clarifications confirming that mergers, reorganisations and intra-group share exchanges will not disqualify a company from availing of the exemption.

These refinements enhance Ireland’s attractiveness as a holding company jurisdiction by providing clarity and consistency in how foreign dividend income is treated whilst aligning Ireland’s rules more closely with those in other jurisdictions.

Pillar Two

The 2025 Bill includes several technical and interpretative amendments to maintain consistency with the latest OECD Administrative Guidance, published in December 2024 and June 2025.

These refinements clarify the calculation of the Domestic Top up Tax and ensure that Ireland’s rules remain fully compliant with international standards and the Pillar Two legislation operates as intended. Importantly, the existing filing obligations, deadlines, the existing 15% effective tax rate and €750 million global turnover threshold remain unchanged.

Country by Country Reporting

The Bill also includes complementary amendments to the legislation governing Country by Country (CbC) reporting for multinational enterprise groups.

The amendments clarify that Ireland’s CbC framework must be interpreted and applied consistently with OECD guidance, ensuring full alignment with global reporting standards. In addition, the Bill clarifies the operation of the €750 million revenue threshold for groups with accounting periods shorter than 12 months.

Film and Digital Games Reliefs

Two creative sector incentives are enhanced. The film corporation tax credit (section 481) is amended to introduce an enhanced 40% rate for projects with at least €1 million in qualifying Irish expenditure on visual effects (VFX) work. Expenditure above this threshold will continue to qualify for the standard 32% rate.

The digital games tax credit is extended to 31 December 2031 and broadened to include post release digital content development, allowing companies to claim relief for updates or downloadable expansions of existing games. Both measures remain subject to EU State Aid approval.

Environmental and Sustainability Measures

Finance Bill 2025 extends several accelerated capital allowance schemes aimed at encouraging environmentally sustainable investment:

  • The energy efficient equipment and gas/hydrogen vehicle and refuelling infrastructure schemes are extended to 31 December 2030;
  • The slurry storage capital allowance is extended to 31 December 2029;
  • The Living City Initiative (LCI) is extended to 31 December 2030, with enhanced flexibility for qualifying expenditure and project timelines.

These extensions maintain alignment between Ireland’s corporate tax policy and its climate transition goals, giving businesses greater certainty for long term investment in green technologies.

Overall Commentary

While the Finance Bill 2025 introduces no radical shifts in corporate taxation, it consolidates Ireland’s position as a stable and predictable jurisdiction for business.

Contact Us

Should you wish to discuss any aspect of Corporation Tax, please contact our team.

Disclaimer: While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, RBK do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.

Authors:

Claire Fitzgerald

Sobhana Rao