Financial Services - Budget 2026

KPMG insights – our view

IAs expected, and in line with prior years, there were relatively few Budget announcements directly relating to financial services. The announcement of the reduction to the rate of tax on certain investment products is a long-awaited change which is expected to help align the taxation of investment returns from such products with the taxation of returns from other investment options. 

As noted in the minister’s speech, the Government has consulted on a number of matters relevant to financial services in recent times, including interest expense deductibility and the funds sector. The promise of a roadmap to be published early next year setting out the intended approach to the simplification of the tax framework to encourage retail investment is welcome. 

It is hoped that the roadmap will include some of the measures included in our response to the recent Funds Sector 2030 consultation and in our pre-Budget 2026 submission. 

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

Our recommendations

While Ireland continues to be a competitive location for international financial services, given the impact of international tax reform on our long-standing 12.5% corporation tax rate and uncertainty in the international business environment more generally, it is important that Ireland continues to maintain and enhance its relative competitiveness in the financial services sector and more generally. 

In this regard, and as set out in our pre-budget submission, we have consistently pursued and will continue to pursue the following objectives:

• The introduction of a foreign branch exemption which would significantly reduce the existing complexity associated with operating a branch structure which applies to many businesses in the financial services sector.  The introduction of a foreign branch exemption would align Ireland’s regime with international peers.  While the introduction of a foreign dividend participation exemption last year and announcements of enhancements to that regime today are welcome developments, a critical next step in the simplification of taxation for businesses operating in the financial services sector is the introduction of a foreign branch exemption, coupled with the reform and simplification of our foreign tax credit regime.
• Simplification of the taxation of the funds sector in line with our recommendations to the Fund Sector 2030 consultation both at fund level and personal investment level.  Today’s announcements of a reduction in the tax rate and the publication early next year of a roadmap on the simplification of the taxation of investment products are an encouraging (hopefully first) step in that process.
• The application of the 12.5% trading tax rate to gains arising on the disposal of assets used in a trade, which would bring both certainty and simplicity to businesses engaged in a trade in Ireland.
• The introduction of an option for corporate groups to file consolidated corporation tax returns, which would reduce complexity and uncertainty for taxpayers and align Ireland’s corporation tax regime with other jurisdictions and other aspects of the Irish regime.