The Bill proposes several measures aimed at supporting Ireland’s green transition. The proposed amendments reflect the government’s ongoing commitment to reducing carbon emissions, aligning with broader EU objectives, and encouraging sustainability for both businesses and individuals.
Vehicle registration tax & benefit in kind
The Bill includes measures to implement this year’s Budget announcements to extend the vehicle registration tax (VRT) relief and benefit in kind (BIK) relief for electric vehicles.
It is proposed that the VRT relief will be extended to 31 December 2026 and the BIK relief for cars and vans will be extended to 31 December 2028, although the additional discount to original market value (OMV) for BIK purposes will taper down from €10,000 in the 2026 tax year to €5,000 in the 2027 tax year, and to €2,500 in the 2028 tax year.
The Bill also proposes to introduce a new vehicle category A1 for zero carbon emission cars and this new category of cars will attract a lower BIK cost of between 6 and 15 percent of the OMV of the car depending on the business mileage in the year.
Energy efficient equipment & capital allowances
As announced by the minister in his Budget speech, it is proposed that the schemes for accelerated capital allowances available in respect of certain energy efficient equipment, gas and hydrogen vehicles used for the purposes of carrying on a trade will be extended to 31 December 2030.
This is very much in alignment with the EU Clean Industrial Deal which has promoted the use of accelerated capital allowances and tax credits to incentivise investment into energy efficient and green energy expenditure.
Domestic generation of electricity
The Bill proposes to extend the exemption of up to €400 per year from income tax, USC and PSRI for certain profits arising to an individual from the microgeneration of electricity at their sole or main residence for their own consumption for a further three years to 31 December 2028.
Interest limitation rules – exemption for certain large scale assets
In an unexpected move, it is proposed that the scope of the current exemption from the interest limitation regime which applies to providing, upgrading, operating or maintaining certain large scale assets (such as renewable energy installations, strategic housing developments and public-private partnership (PPP) roads) where relevant conditions are met will be extended to include electricity transmission infrastructure developments, strategic gas infrastructure developments, strategic infrastructure developments and large-scale residential developments, as defined in the Planning and Development Act 2024 where a decision to grant permission for that development has been made under that Act.
This encompasses a broad range of infrastructure assets such as transmission lines, substations and switching stations, electricity interconnectors, downstream gas pipelines, surface storage of natural gas, natural gas terminals, waste-water treatment plants, waste incinerators, certain harbour and port installations, thermal power stations and certain healthcare infrastructure.
This is a welcome development and will give investors and developers of these projects more certainty regarding the tax treatment of their financing costs. The proposed amendment will be subject to the passing of a Ministerial Order.
Get in touch
The measures unveiled in Finance Bill 2025 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 Paul O'Brien of our Tax team today.
