Dr. James Dalton, from our R&D Tax Incentives Practice, writes about how the pharmaceutical sector has emerged as a critical component of the Irish economy.
In recent years Ireland has established itself as a prime destination for pharmaceutical companies, offering a combination of favourable economic policies, financial incentives, and a highly skilled workforce, among other benefits.
This has led Ireland to become one of the top 5 global exporters of pharmaceuticals with approximately 50,000 people directly employed in more than 90 companies located throughout Ireland.
This positive environment is created via a number of distinct mechanisms and circumstances.
R&D tax credit
Ireland provides a highly attractive Research and Development (R&D) tax credit, which is designed to encourage investment in knowledge building activities. Companies can claim 30% of their qualifying R&D expenditure as a cash refund.
This is available in addition to the standard 12.5% trading corporation tax deduction, making it a significant financial incentive for pharmaceutical companies engaged in research and development.
Importantly the R&D tax credit applies to a wide range of activities, such as the development or improvement of new or existing product, processes, methods etc.
A key distinguishing element of the Irish system versus those present in some of our main competitors is the ability to include capital investments, such as buildings and plant and machinery, in a claim once specific conditions are met.
Given the significant investment required to establish a new facility, this can dramatically lower the cost of establishing a new site or investing in technology to develop a new process.
Comprehensive grant support
The Irish government, through IDA Ireland, SEAI and other bodies, offers a variety of grants and financial supports that pharmaceutical companies can avail of. These grants are designed to support research and development, feasibility studies, and innovation initiatives.
Ireland's funding programs include direct assistance for exploratory work ahead of longer-term R&D projects, and collaborative funding opportunities. Examples include:
- Capital grants: These are available in certain regions to assist companies with the costs of purchasing equipment, buildings, and other fixed assets necessary for their operations. These grants are particularly beneficial for companies looking to expand their facilities or upgrade their technological capabilities.
- Environmental grants: To promote sustainability and eco-friendly practices, environmental grants are available, and these are aimed at reducing the environmental impact. These grants support initiatives such as energy-efficient systems, waste reduction programs, and the development of eco-friendly packaging solutions.
- Research, Development & Innovation (RD&I) grants: To foster research excellence and innovative solutions within the pharmaceutical industry, RD&I grants are available. These grants aim to support cutting-edge research projects, the development of novel products, and innovative methodologies. By leveraging RD&I grants, companies can advance their scientific endeavours, enhance their competitive edge, and contribute to the industry’s continuous evolution. These grants represent a commitment to nurturing groundbreaking ideas and sustaining a robust pipeline of innovations.
Additionally, grant aid is available for training, helping companies enhance their operations and build innovation capabilities. The availability of these grants ensures that pharmaceutical companies can access the necessary resources to drive their research and development efforts.
Competitive corporation tax rate
Ireland's corporation tax rate is one of the lowest in Europe, standing at 12.5% for trading income. This low tax rate is a major draw for pharmaceutical companies, as it allows them to maximise their profits and reinvest in their operations.
The favourable tax environment has contributed to Ireland becoming a hub for multinational pharmaceutical companies, with many of the world's leading firms establishing significant operations in the country.
Taken in combination the availability of R&D tax credits, grant support, and low corporation tax creates a very supportive environment that encourages the establishment and expansion of pharmaceutical facilities in Ireland.
These incentives help offset the high cost of the initial set up of a pharmaceutical site. This capital investment also helps anchor these companies to Ireland for the future, creating a mutually beneficial symbiotic relationship.
Pro-business environment
Ireland is widely recognised for its pro-business environment, which has played a key role in attracting and retaining leading pharmaceutical companies.
Beyond the tax advantages listed above, Ireland’s government is known for its supportive and collaborative approach to business, working closely with companies through agencies like IDA Ireland to facilitate investment and growth.
The regulatory environment is stable and efficient, helping businesses navigate setup and expansion with confidence. Combined with a skilled workforce and strong legal protections, Ireland’s business-friendly climate makes it an ideal location for long-term investment in the life sciences sector.
EU membership
Ireland’s membership in the European Union offers significant advantages for pharmaceutical companies operating in the country. As part of the EU single market, Ireland provides seamless access to over 400 million consumers, allowing companies to manufacture and distribute products across member states without trade barriers.
This access is especially valuable for pharmaceutical firms, as it simplifies regulatory alignment, supports efficient supply chains, and facilitates faster time-to-market for new therapies.
Additionally, Ireland benefits from EU-wide research funding and collaboration opportunities, helping to drive innovation and maintain high standards in science and healthcare. For companies, this means operating in a stable, well-regulated environment with strong international connections.
Highly educated workforce
Ireland offers a highly skilled, multicultural workforce with deep expertise in biopharma, quality assurance, and advanced manufacturing. With fast-track employment permits and access to the EU’s vast labour pool to bolster staffing in addition to the local population.
The country has one of the highest proportions of STEM graduates per capita in the European Union, ensuring a steady supply of qualified professionals in science, technology, engineering, and mathematics. The presence of top-tier universities and research institutions further enhances the talent pool available to pharmaceutical companies.
Additionally, Ireland's education system is ranked among the top globally, providing a strong foundation for innovation and research. Pharmaceutical companies in Ireland benefit from access to a workforce that is not only highly educated but also adaptable and skilled in the latest scientific and technological advancements.
Geography
One of Ireland’s key strengths is its strategic geographic location, providing direct access to both European and transatlantic markets. Its geographic position also offers a unique advantage for pharmaceutical companies by effectively bridging time zones between North America and Asia. Ireland enables real-time collaboration with both U.S. and European partners during standard business hours.
This overlap is particularly valuable for global pharmaceutical operations that require constant coordination across R&D, regulatory affairs, manufacturing, and supply chain management.
Quality of life
Ireland offers a high quality of life that many professionals and their families find appealing. With a strong focus on work-life balance, the country blends lively cities like Dublin, Cork, and Galway with easy access to beautiful natural scenery—from coastal walks to green countryside.
Ireland also provides reliable healthcare, a good education system (including international school options), and a friendly, inclusive atmosphere. These qualities make it an attractive place to live and work, helping companies draw in skilled talent from around the world.
Ireland consistently ranks highly in global quality of life indices, thanks to its safety, political stability, and strong community values.
Challenges faced by Ireland's pharmaceutical industry
In recent months there has been significant concern regarding the spectre of US tariffs and other protectionist measures and it was feared that these could disrupt Ireland's multi-billion worth of exports to the U.S., potentially leading to job losses and reduced investment.
However, recent US- EU discussions have indicated that tariffs on pharmaceutical imports would be capped at 15%, with generic pharmaceuticals exempted. While still representing a challenge for the industry, the proposed cap brings a level of predictability and stability to the industry in Ireland and is a far cry from the 250% tariffs that the US administration had previously indicated.
An interesting outcome of the recent talks is the proposed exemption for generic pharmaceuticals. This could see an expansion of this type of manufacture in Ireland, especially given the significant numbers of blockbuster pharmaceuticals coming off patent over the next 10 years, such as Ozempic (semiglutide), Keytruda (Pembrolizumab) and Eliquis (Apixaban).
Separately, the current US administration's approach to healthcare and pharmaceutical regulations has introduced uncertainties that could affect the industry's operations and compliance requirements.
Additional risks include infrastructure limitations, such as issues with water, wastewater, energy grids, and the ever-present issue of the dysfunctional housing market. These factors may affect Ireland's capacity to attract new investment and maintain current businesses.
It is hoped that these limitations will be mitigated by the recently announced €200 billion National Development Plan (NDP). This represents the most ambitious investment programme in the State’s history.
This plan will focus on key areas of interest to the pharmaceutical industry including funding for housing, water, and energy. However, it is yet to be seen how rising construction costs, planning delays, and labour shortages impact on these projects.
Conclusion
Whilst there is great uncertainty regarding global trade, with tariffs looming and the regulatory landscape changing, this applies equally across the globe and the support available in Ireland can help offset some of the costs in this changing world.
Ireland's combination of generous R&D tax credits, comprehensive grant support, competitive corporation tax rates, a highly educated workforce, recent industry trends, impressive growth statistics, and the ability to navigate challenges makes it an ideal location for pharmaceutical companies.
The recently announced National Development Plan and the continued improvements being made to the R&D tax credit are also very welcome improvements to the business landscape and will significantly assist the continued development of the pharmaceutical industry.
These factors contribute to a thriving environment for innovation, research, and development, allowing companies to grow and succeed in the global pharmaceutical industry.
By basing their operations in Ireland, pharmaceutical companies can leverage these advantages to drive their growth and make significant contributions to healthcare and medical advancements worldwide.
Get in touch
If you have any questions or would like to discuss qualifying for R&D tax credits, contact Dr. James Dalton in our R&D Incentives Practice.
We would be delighted to hear from you.
