Finance Bill 2025 headlines

Amendments to participation exemption for foreign dividends

The Bill includes provisions to widen the scope of the participation exemption for certain foreign dividends.

Extension of the Territorial Scope

The current requirement that eligible dividends be received from companies that are resident in EU/EEA and treaty jurisdictions results in the exclusion of dividends received from companies’ resident in many important trading partner jurisdictions. For relevant distributions made on or after 1 January 2026, the Bill includes provisions to extend the definition of ‘relevant territory’ to include jurisdictions where a non-refundable withholding tax is operated on the ‘relevant distribution’ to the Irish parent company.

In addition, a country (that is not already a “relevant territory”) will become a “relevant territory” from the date that a double tax agreement between Ireland and that country is signed. A lookback rule will also be introduced for the period three-year period prior to the signing of the double tax agreement.

Simplification of the “Relevant Subsidiary” Condition

The exemption applies to certain foreign dividends received from a “relevant subsidiary” where certain requirements are met. Currently, there is a requirement that the subsidiary be tax resident in a “relevant territory” for the five years prior to making the distribution. For relevant distributions made on or after 1 January 2026, the Bill includes a proposal to shorten the period to three years. This should make it easier to qualify for the exemption.

Other Technical changes

The Bill makes provision for a number of technical changes which should simplify the operation of the exemption. For example, a transfer of shares should not be treated as a transfer of a business or part of a business for the purposes of the exemption. Also, where a distribution is paid out of profits, it has been made clear that the additional S626B requirements which apply to a distribution out of assets will not apply to the distribution.

The introduction of these amendments follow a period of very constructive dialogue which we had with the Department of Finance. However, there are other important aspects of the exemption which would benefit from refinement.

Enhanced corporation tax deduction for expenditure on qualifying apartment blocks

As announced in the Budget, the Bill makes provision for the introduction of an enhanced corporation tax deduction of 125% of certain eligible expenditure incurred on the construction of a new build apartment block or the refurbishment of an existing building on a change of use to be an apartment block. The enhanced deduction, of up to a maximum €50,000 per apartment unit, will only be available on completion of the development of (or refurbishment on a change of use to) a multi-storey apartment block principally comprised of not fewer than 10 apartments. This will correspond to a potential net tax benefit of up to €6,250 per apartment (€50,000 @ 12.5%).

The enhanced deduction can only be claimed by a developer who is the beneficial owner of the property at the time it is completed. The developer will require a Certificate of Compliance on Completion.

The enhanced deduction will only be available in respect of a completed qualifying apartment block where the Commencement Notice is lodged on or after 8 October 2025, and on or before 31 December 2030, with the relevant Local Authority.