The Budget centred primarily on property and construction-related tax measures, with the minister announcing a range of incentives and enhancements aimed at boosting supply, encouraging regeneration, and addressing dereliction. The principal measures are outlined below.
From 8 October 2025, the VAT rate on the sale of completed apartments will be reduced from 13.5% to 9% until 31 December 2030. The 9% rate will apply to the VATable supply of an apartment, used or to be used for residential purposes, within a multi-story block of not less than three apartments with grouped or common access.
This reduced rate of VAT only applies on the sale of apartments, and it does not currently extend to construction costs related to apartment development.
An enhanced corporation tax deduction is being introduced for qualifying apartment construction costs to help address the viability gap that currently exists between total apartment development costs and viable market prices, by reducing corporation tax payable on profits.
This new measure allows an enhanced deduction of 125% of qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit. This equates to a potential net benefit of up to €6,250 per apartment (€50,000 at the 12.5% corporation tax rate).
The enhanced deduction will be available for projects comprising of 10 or more apartments and will be available for both new-build developments and for conversion projects (including a change of use, such as the conversion of offices or retail spaces into apartments).
The enhanced deduction will apply to projects for which a Commencement Notice is submitted between 8 October 2025 and 31 December 2030. It may be claimed upon submission of a Completion Notice by a developer who is the beneficial owner of the property at the time of completion.
We expect further detail on the deduction and scope of qualifying costs in the Finance Bill.
The scheme provides for a partial repayment of the stamp duty paid on the acquisition of land where the land is subsequently developed for residential purposes subject to a number of conditions. The minister confirmed in his Budget speech that the scheme will be extended to 31 December 2030.
The Finance Bill will introduce further amendments to the scheme, including: (i) an extension of the time limits for large-scale residential developments from 30 to 36 months, for both the limit on the period from site acquisition to commencement and the time from commencement to completion; and (ii) for multi-phase developments, a refund will be available for the full site upon commencement of the first phase of development.
A corporation tax exemption is being introduced for rental profits arising from homes that are designated by the Minster for Housing, Local Government and Heritage as Cost Rental Scheme properties.
The exemption will apply with effect from 8 October 2025 and is aimed at accelerating the delivery of affordable homes. Further details on the exemption will be included in the Finance Bill.
An RZLT exemption is being provided to apply during An Coimisiún Pleanála proceedings brought by a third party in relation to a grant of planning permission in respect of a relevant site. The minister also confirmed that RZLT landowners will have another opportunity to request zoning changes for land on the revised 2026 map, potentially qualifying for a 2026 exemption based on such submissions.
In addition, consequential amendments required on foot of the Planning and Development Act of 2024 and technical legislative amendments will be included in the Finance Bill to ensure that RZLT operates as intended. It is hoped the Finance Bill measures will include an exemption from RZLT for forward funding sales.
The income tax relief for retrofitting by landlords of rented residential properties is being extended for a further three years to 31 December 2028. The Finance Bill will also provide that the relief can be claimed in respect of the year in which the expenditure is incurred, and that the number of eligible properties increased from two to three.
A new Derelict Property Tax (“DPT”) to be administered by the Revenue Commissioners is to be introduced to target dereliction. The DPT will replace the existing Derelict Sites Levy and will be legislated for in Finance Bill 2026. Local authorities will begin the process of identifying derelict properties in 2026 and a preliminary register of derelict properties will be published in 2027, with the DPT to be implemented as soon as possible thereafter.
The rate of the DPT is yet to be determined; however it is envisaged that tax rate would not be lower than the current 7% rate which applies for the Derelict Site Levy.
Confirmation was provided that the minister does not intend to introduce entity-level taxation measures for Irish Real Estate Funds (“IREFs”), and he has committed to undertaking a public consultation on proposals to simplify the IREF regime without limiting its effectiveness.
Certain enhancements will be made to the Living City Initiative to enhance the attractiveness of the relief and to extend the scope of the relief.
The amendments include the continuation of the scheme to 31 December 2030, the extension of the scheme to five regional centres under the National Planning Framework (being Athlone, Drogheda, Dundalk, Letterkenny and Sligo), and expanded eligibility including properties built before 1975 and commercial-to-residential conversions (including “over the shop” premises).
Where the works are carried out by enterprises, the maximum amount of relief available to those undertakings will be increased from €200,000 to €300,000 in line with EU State Aid De Minimis requirements.
Housing and related infrastructure challenges are some of the key areas impacting Ireland’s competitiveness and continued growth. Budget 2026 has tackled those challenges head-on, with a suite of wide-ranging tax measures targeted at housing, and large capital investment commitments. Why now?
The Government has ambitious targets of 300,000 homes by 2030, or 50,000 to 60,000 homes a year, with industry sources indicating that 50% of these need to be apartments. With the complicated nature of apartment builds, they require a different capital and funding model, and current regulations, costs and timelines mean there are significant viability challenges with their development.
Against that backdrop, it’s no surprise that Budget 2026 has focused largely on housing measures, targeting increasing supply within that 2030 timeframe and reducing the viability gap that currently exists for apartments.
The package of housing measures announced is widespread, targeting apartments, as well as regeneration, retrofits and reforms.
The most impactful measures are likely to be:
VAT on property transactions remains a complicated area, and for now it seems that the new VAT reduction only applies on the sale of completed apartments, not VAT charged on the construction of new apartments, which remains at 13.5%.
As VAT on construction is an irrecoverable cost for build-to-rent apartments, the VAT reduction will not lower construction expenses, meaning such schemes must rely on other Budget measures to support viability.
Enhancements to the Living City Initiative will support regeneration efforts, though uptake of the relief remains low, and it is unclear whether the proposed enhancements will significantly improve participation.
The Budget measures, together with the changes already announced by the Government earlier this year in the areas of rent pressure zone reform, planning system reform, revised apartment design guidelines and instructions to the local authorities to zone more land for housing, show a continued focus on the key issues faced by the industry, and should help with the viability challenges on apartments, and lead to more homes being delivered.
We look forward to further updates under the Government’s revised Housing Plan expected in the coming weeks. We believe that continued engagement between policymakers and stakeholders within the property and construction industry will be essential to support the delivery of homes, infrastructure, and long-term sector resilience.
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 Carmel Logan of our Tax team today.
