Ireland’s Finance Bill 2025 was published on 16 October 2025.1 Given the minimal changes to personal tax announced on Budget Day in the prior week, it was no surprise that there were relatively few specific personal tax measures included. There are no changes to underlying income tax bands and tax rates for 2026 with only a modest change to the Universal Social Charge (USC) bands.
However, the Bill did include some technical amendments relating to two mobile-employee tax reliefs: the Special Assignee Relief Programme (“SARP”) and the Foreign Earnings Deduction (“FED”) tax relief.
The Bill also outlined some other technical amendments of relevance for individuals and employees, mainly the extension of some pre-existing tax credits and reliefs for company-provided vehicles, but also in respect of mortgage interest relief and the rent tax credit.
WHY THIS MATTERS
The changes to the minimum annual base salary required for SARP relief for new arrivals to Ireland from 2026 may mean fewer employees are eligible for the relief. Applications received from 2026 after the 90-day application deadline, however, may now qualify for SARP, albeit for a reduced number of tax years. For tax-equalised cases, these changes will alter the costs of assignments to Ireland for employers, so are important to consider.
For employees who are eligible to claim FED, the changes proposed will enhance the relief which was otherwise due to expire at the end of 2025.
SARP
SARP relief had been due to expire on 31 December 2025, for new arrivals to Ireland after this date but the Bill confirms an extension of SARP to 31 December 2030.
However, a €25,000 increase in the minimum qualifying basic annual salary (from €100,000 to €125,000 p.a.) will apply from 1 January 2026, for arrivals to Ireland between 2026 and 2030. This change should not impact pre-existing SARP claimants. As the minimum basic salary requirement disregards other payments (such as bonuses, allowances, and commission- and share-based remuneration) employees with heavily-weighted variable pay may not meet the minimum requirements and therefore will not qualify for SARP.
The Bill also introduced some welcome improvements to several administrative procedures in relation to SARP from 1 January 2026:
- The deadline for the annual employer SARP return will change from 23 February to 30 June following the end of the relevant tax year. This will allow more time for employers to collate the information that they are required to report to Revenue in respect of all domestic and expatriate employees availing of the relief.
- A SARP application currently must be made within 90 days of arrival, otherwise relief will not be granted. This deadline has been stringently enforced by Revenue to date, even where the employee otherwise meets all other qualifying conditions. The Bill has introduced a modest measure of relief in respect of applications which are made after 90 days but within 180 days of an employee’s arrival in Ireland. In such cases, SARP will still be available, but for a maximum of four consecutive tax years (rather than the maximum of five), with relief commencing in the year after the year in which the employee arrived.
The Bill did not change the current scope of a relevant employee to include new hires so the requirements for a minimum of six-months employment outside Ireland with a qualifying foreign group company remains.
FED
Introduced in 2012, the Foreign Earnings Deduction (“FED”) was primarily designed to assist Irish indigenous businesses to expand internationally, in particular into emerging markets. FED operates by allowing a pre-tax deduction from taxable employment income, calculated by reference to the qualifying days which an employee spends working in specific jurisdictions.
The Bill confirms that FED, which was due to expire in 2025, will be extended for a further five years, which is positive. In addition, from 1 January 2026:
- the maximum amount of relevant employment income that may qualify for income tax relief will increase from €35,000 to €50,000;
- the relief will be extended to apply in respect of qualifying time spent working in the Philippines and Türkiye.
The definition of a qualifying day has been amended such that an individual is no longer required to spend three consecutive days working in a relevant state for the day to qualify.
KPMG INSIGHTS
This is a welcome change as the requirement to be present in a relevant state for three consecutive days, in our experience, has limited the relief available to some employees.
Company Cars and Vans
The Bill introduced the following changes to the calculation of the Benefit-in-Kind (BIK) due in respect of certain company-provided vehicles.
Introduction of New Vehicle Category
A new category for vehicles with zero CO2 emissions will be introduced from 1 January 2026. A reduced BIK rate of between 6 percent and 15 percent will apply, depending on business mileage, to vehicles falling within the new A1 category. Category A will be amended to reflect the introduction of the new zero-emissions category and will now apply to cars with CO2 emissions above 0g/km but not exceeding 59g/km.
Original Market Value (OMV) of Cars & Vans
The temporary universal reduction in the OMV of cars in categories A1 to D, as well as vans (including electric vans), which lowers the amount of BIK payable, is being extended for three more years to 31 December 2028, on a tapered basis.
This relief will remain at €10,000 for 2026, then reduce to €5,000 in 2027 and €2,500 in 2028. (The current expectation is that the relief will be abolished in 2029.)
Additionally, the lower limit in the highest mileage band is being permanently reduced from 52,001km to 48,001km from 1 January 2026.
Universal Social Charge
On Budget Day, the minister announced that the minimum wage will increase from 1 January 2026, to €14.15 per hour and that in keeping with prior years, there would be a corresponding increase to the ceiling on the second rate of USC (2 percent) to help ensure that workers on the new minimum wage do not see the benefit eroded by higher rates of USC. The new upper limit for the 2-percent rate will be €28,700, an increase of €1,318.
In addition, the concession applying reduced USC for full medical card holders under 70 years of age whose individual annual income does not exceed €60,000, will be extended for a further two years until the end of 2027.
Taxation of Certain Investments and Life Assurance Policies
The Finance Bill includes provisions required to effect the reduction in the tax rate from 41 percent to 38 percent on income and gains from certain investments and life assurance policies from 1 January 2026, including:
- Domestic life assurance policies;
- Certain foreign life-policies;
- Irish-domiciled investment funds; and
- Equivalent offshore funds in other European Union (EU) member states, European Economic Area (EEA) states, and OECD countries with which Ireland has double taxation agreements.
KPMG INSIGHTS
The minister stated his intention to publish a roadmap early in 2026 to set out his intended approach to simplify and adapt the tax framework to encourage retail investment (referencing recommendations from the European Commission on Savings and Investment Accounts). We look forward to publication of the roadmap and providing input to the resulting measures for future finance bills.
Other Measures
Rent Tax Credit
The rent tax credit will be extended for three years to 31 December 2028. The value of the credit, and the conditions to qualify for the relief, remained unchanged.
The rent tax credit is capped at €2,000 per year for jointly-assessed married couples or civil partners, and €1,000 per year for single persons.
Mortgage Interest Relief
The Finance Bill provides for the extension of mortgage interest relief until 31 December 2026. This tax credit is for taxpayers who have made interest payments on a mortgage for their principal private residence. The relief is available to homeowners who had an outstanding mortgage balance between €80,000 and €500,000 on 31 December 2022.
For 2025, the relief will be calculated based on the increase in interest paid in 2025 compared with the interest paid in 2022. The amount qualifying for relief at the standard rate of tax (20 percent) is capped at €6,250 per property, i.e., maximum benefit of €1,250.
For 2026, the relief will be reduced and will be calculated based on 50 percent of the increase in interest paid in 2026 compared with interest paid in 2022. The amount qualifying for relief at the standard rate of tax (20 percent) is capped at €3,125 per property, i.e., maximum benefit of €625.
Direct Debit Payments for Preliminary Tax Payments
An obligation to make a Preliminary Tax payment (an advance income tax payment) can arise where an individual has taxable investment, trading, or professional services income, as such income is not usually taxed at source.
The Finance Bill proposes some changes to the ability to make a payment of preliminary income tax by direct debit. The measures remove the requirement for the direct debit to consist of a set number of equal monthly instalments and with a facility proposed to allow for variable direct debits in future.
KPMG INSIGHTS
The Preliminary Tax payment guidelines have since issued.2
It is essential to get in front of the changes described in this newsletter and to communicate quickly and clearly with key stakeholders, so that they can properly plan, budget, and be prepared to make payroll, withholding, or any other necessary adjustments once the Finance Bill is passed and its measures come into force.
Taxpayers and global mobility programme managers with questions about how the above-noted measures may impact them and/or what steps they may need to take to be in compliance should consult with their usual tax service provider or a member of the GMS tax team with KPMG in Ireland (see the Contacts section).
FOOTNOTES:
1 Government of Ireland, Press release, "Minister Donohoe publishes Finance Bill 2025" (16 October 2025).
For the text of the Budget speech and Budget-related documents online, see "Budget 2026."
2 Irish Revenue, "Preliminary Income Tax Direct Debit Guidelines" (updated October 2025).
RELATED RESOURCE:
For analysis of Finance Bill 2025 from KPMG in Ireland, see: https://kpmg.com/ie/en/insights/tax/finance-bill-2025.html.
Contacts
Disclaimer
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