As anticipated, the minister’s speech had limited initiatives aimed at international business. The minister acknowledged the uncertainty and fragmentation in recent times at a global level and spoke of the need to strengthen our resilience.
The key announcements for international business are:
These, and broader initiatives announced such as the commitment to invest significantly in infrastructure, will be welcomed by international business.
Ireland’s ability to attract inward investment from international business is legendary. The cornerstone of Ireland’s attractiveness has been its certainty and stability, in particular the low corporate tax rate of 12.5% which has been in place for over 20 years.
Given its importance, Ireland cannot afford to take inward investment for granted. Recent developments at the global stage – both at an OECD and US level – mean that improvements to the Irish regime are necessary.
Firstly, the OECD’s global minimum tax project (or Pillar Two) continues to develop and the implementation of the side-by-side approach to appease the US is not yet finalised – the minister stated there is still considerable uncertainty. In addition to the US, other major economies such as China and India have not implemented the Pillar Two rules.
It is vital that the application of Pillar Two does not become a European-centric phenomenon. Such an outcome threatens the competitiveness of the EU, both from a tax rate and cost of doing business perspective, given the complexity and high compliance burden that Pillar Two entails. It is imperative that Ireland’s voice is heard, and its interests are advanced at an EU and OECD level.
Secondly, recent US tax changes introduced in the One Big Beautiful Bill Act have the potential to erode or eliminate Ireland’s tax competitiveness for US multinational enterprises (MNEs), as there can now be little difference between the tax paid in the US and foreign tax paid on profits from overseas activities.
In addition, the proliferation of tariffs in the US and changes in a global political landscape that threaten globalisation, have created a perfect storm for making investment decisions.
However, Ireland is acting from a position of strength compared to many of our neighbours who have sizable budgetary issues. History shows us the difficulty the UK faced when seeking to decrease their tax rate to 17%, instead ultimately increasing the rate back to 25%. The US may well face a similar dilemma in due course, and we see Ireland as a very effective hedge against potential future tax increases in the US.
Ireland is also starting from a strong position given the robust mix of international business investment here today. We would like to see the Irish Government take proactive policy steps to ensure Ireland is at the forefront of the next wave of investment by international business and to be an innovation hub.
The changes announced to the RDTC are welcome, but we believe there is a need for a wider incentive to focus on attracting investment in emerging areas such as green technology and artificial intelligence. We believe this would help drive not just further foreign investment, but also the growth of indigenous Irish business.
The life blood of all businesses, large and small, indigenous or inbound, is their employees. We would like to see further measures that recognise the importance of attracting and retaining this key resource. The extension of SARP is welcome but it should also be enhanced further.
We also commend the Government on their existing initiative to attract career researchers and established academics to Ireland, which should be maintained and expanded.
We would like to see measures to reduce the complexity of the tax system and the burden placed on businesses. The complexity has grown exponentially in recent years following the introduction of measures from the EU Anti-Tax Avoidance Directive (ATAD) and Pillar Two.
One need only look at the corporation tax return, which is almost 70 pages, to see the complexity. In addition, many MNEs will have Pillar Two compliance obligations. The resources and costs this entails are significant. Reducing the complexity and compliance burden will reduce the cost of doing business and boost Ireland’s attractiveness.
The introduction of a participation exemption for foreign dividends last year was a positive development, but now the practical limitations of these rules must be ironed out to ensure they are fit for purpose. The foreign branch exemption should also be advanced as quickly as possible.
Ireland has a great track record of attracting investment and does many things right, but if the Government shows the desire and commitment to implement the above pro-investment policies, we can continue to punch above our weight and share a bright future.
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 Cillein Barry of our Tax team today.
