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      Key measures

      The minister’s speech included some amendments to the Irish tax system to encourage and support domestic business and entrepreneurship. The principal measures of note are:

      • Capital Gains Tax

        An increase in the lifetime limit on gains qualifying for the 10% rate of Capital Gains Tax (“CGT”) arising from the disposal of qualifying business assets under the Revised Entrepreneur Relief, from €1 million to €1.5 million. This is to apply to disposals after 1 January 2026. The application of this change to cases where a portion of the existing €1 million threshold has already been utilised through qualifying disposals prior to 1 January 2026 will be important.

      • Stamp duty

        A new exemption from the 1% stamp duty charge on the acquisition of shares in Irish incorporated companies that are traded on a regulated market, a multi-lateral trading facility, or an equivalent third country market, where the relevant company has a market capitalisation below €1 billion. The timing of the commencement of this exemption is unclear, but it is expected that a sunset clause will apply which will expire on 31 December 2030. With the introduction of the new exemption, the current stamp duty relief for shares in Irish incorporated companies listed on the Euronext Growth Market (formerly the Enterprise Securities Market) will be discontinued.

      • KEEP scheme

        The extension of the Key Employee Engagement Programme (“KEEP”) to 31 December 2028, subject to approval from the European Commission and a subsequent Ministerial Commencement Order being made on receipt of that approval.

      • VAT

        A reduction in the VAT rate applied to food and catering, and hairdressing services, from 13.5% to 9%, commencing from 1 July 2026.

      • Agricultural tax reliefs

        Budget 2026 also extends key agricultural tax reliefs (farm restructuring relief, farm consolidation relief and young trained farmer relief) to 31 December 2029, while broadening some of these reliefs to include forestry eligibility.

      In line with commitments outlined in Budget 2025 and the Programme for Government, and following a review conducted by the Department of Finance earlier this year, Budget 2026 introduces the following enhancements to the R&D tax credit regime:

      • Credit rate increase

        An increase in the rate of credit from 30% to 35%. The rate change is of universal application to all companies carrying on qualifying activities and will apply to many innovative domestic companies. 

      • First-year payment threshold

        An increase in the first-year payment threshold from €75,000 to €87,500. This change is designed to provide quicker access to funding for all claimants but is particularly beneficial for domestic companies carrying out smaller projects.

      • Qualifying costs

        To simplify administration, 100% of an R&D employee’s emoluments will be treated as qualifying costs, provided they spend at least 95% of their time on eligible R&D activities.

      We also welcome the publication of an action plan with the aim of reforming Ireland’s tax regime for the taxation and deductibility of interest. The reform is essential for indigenous Irish businesses seeking to raise finance to support growth and scale up operations.

      Debt is a critical driver of growth. If relief for interest is not available, investment will move elsewhere, and the current regime makes it challenging in some circumstances to obtain a deduction for interest. A feedback statement will be published in November, and we look forward to participating in the process on behalf of our Irish-based clients. 

      Alan Bromell
      Alan Bromell

      Partner,

      KPMG in Ireland

      KPMG insights – our view

      Encouraging and supporting domestic entrepreneurship should be a key focus of Irish tax policy. The adoption of targeted pro-growth tax policies assists domestic enterprises to scale and grow, thereby fostering growth in the economy. It is also vital that Ireland matches its ambition for continued FDI expansion with a focus on strengthening the domestic enterprise sector.

      Successive governments have consistently emphasised this objective, and the minister repeated this sentiment in his Budget speech, which is welcome. However, while the challenge seems well acknowledged and understood, and there have been some positive developments, it has not been enough to have a meaningful impact. We would like to have seen more to address this in Budget 2026.

      Measures we proposed but which have not been addressed in this Budget include:

      • Investment in SMEs

        Changes to Ireland’s CGT rules to encourage investment in SMEs, including the  introduction of CGT rollover relief for reinvestment into innovative companies and amending angel investor relief to align it with commercial structures typically used by SMEs.

      • Taxation of dividends

        Limiting the taxation of dividends paid by active SMEs to remove the incentive to sell the company, often too early

      • Employment Investment Incentive Scheme

        Enhancement and simplification of the Employment Investment Incentive Scheme to increase its uptake and drive more private capital into Irish companies.

      • USC

        Removing the 3% Universal Social Charge on self-employed individuals.

      While Budget 2026 extends the KEEP scheme until 31 December 2028, it does not resolve the challenges in accessing the regime. As a result, it fails to mitigate the competitive disadvantage faced by private companies in offering stock-based compensation compared to multinational firms.

      The increase of €500,000 in the lifetime limit under the Revised Entrepreneur Relief is not meaningful enough to make the impact that the regime could potentially have in retaining Ireland’s brightest and best entrepreneurs.

      The fact that the current system of costing tax measures is based on the tax foregone, without taking into consideration the behavioural changes associated with those measures, also continues to be a challenge.

      A supportive tax framework is essential to incentivise founders to retain and grow their businesses in Ireland, and to remain personally invested in their long-term development within the country.

      The tax system needs to cater not only to start-up businesses, but also to those companies who have scaled from Ireland, have reached a point of inflection, and need further support to advance to the next level.

      In the absence of meaningful reform, founders and their investors are increasingly directing capital toward other jurisdictions or opting for early exits. This trend risks undermining Ireland’s potential to cultivate a greater number of large, homegrown companies in the long term.

      Get in touch

      The measures unveiled in Budget 2026 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.

      Contact Alan Bromell of our Tax team today. 

      Alan Bromell
      Alan Bromell

      Partner,

      KPMG in Ireland

      Expert tax services for businesses & individuals operating in Ireland & internationally
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