R&D incentives - Budget 2026

Introduction

2025 has presented many challenges for companies operating in Ireland. The year began with rising tensions between global trading superpowers, resulting in disruption to global supply chains and increased uncertainty in international markets. What followed shortly after was the introduction of tariffs, which has added to the uncertainty that companies are facing.

On the same day that the US announced tariffs which would be applied to certain jurisdictions (Liberation Day), the Department of Finance launched its Public Consultation on the R&D Tax Credit and Other Options to Support Innovation. The purpose of the consultation was:

1. To review the effectiveness of the R&D tax credit against its intended policy objectives, and
2.  To consider other options to incentivise innovation in a targeted manner and in line with Government objectives.

Given the choppy waters that businesses have navigated since the turn of the year, the hope was that Budget 2026 would give them some relief in these uncertain times.

Other RDTC enhancements

Another enhancement to the RDTC is an increase in the amount of the credit available to be refunded to a company as its first-year instalment. This has increased from €75,000 to €87,500. This change, while modest, is designed to provide quicker access to funding for Small and Medium Enterprises (SMEs).

The update means that companies with an RDTC claim of €87,500 or less, will receive the full benefit of its claim upfront in the first year. Claimants of between €87,500 and €175,000 will also benefit by receiving their refund quicker than those with larger claims.

Furthermore, an administrative simplification measure was referenced in the Budget 2026 Tax Policy report. This measure allows for 100% of an R&D employee’s emoluments to be allowed as qualifying R&D expenditure where at least 95% of their time is spent on qualifying R&D activities.

In recent years, Revenue practice has been to disallow a certain percentage of time spent by dedicated R&D scientists and engineers to account for non-R&D activities such as training, administration and HR duties that they may undertake. This positive update will provide more certainty and a reduction in administration for companies that employ dedicated R&D personnel whose sole role is to conduct R&D.

Conclusion

Ireland continues to be an excellent location for companies to do business and offers competitive R&D incentives for those who locate their R&D operations here. The spillover effects from locating R&D here are significant and from experience, we have seen the advantages available to companies from co-locating R&D operations with manufacturing operations.

For Ireland, this often means that significant manufacturing investment opportunities follow where the R&D operations are established, particularly in the life sciences sector.

The RDTC rate increase to 35% sends a strong message to the international business community that sets Ireland apart from its competitors. It reinforces our commitment to innovation and ensures we remain globally competitive.

However, further low-cost, targeted reforms can unlock additional benefits, improve administration and make the RDTC regime more dynamic and accessible, especially for ambitious SMEs.

Hopefully, we see these addressed within the R&D Compass – let competitiveness be Ireland’s North Star.