Contents

Introduction

Finance (No. 2) Bill 2026 provides the legislative detail behind Budget 2027, with changes affecting businesses, investors, property owners and individual taxpayers.

Published on 19 October, the 79-section Bill introduces a new Individual Investment Account, revises the rules on interest deductibility and Pillar Two, and establishes the framework for mandatory electronic invoicing and digital VAT reporting. 

Alongside changes to existing rates and reliefs, several measures will require businesses to review financing arrangements, investment products and compliance systems.

Personal tax: rates, credits and reliefs

The Bill legislates for the Budget 2027 personal tax package, including increases to income tax bands, credits and targeted reliefs.

Standard rate band increase

The standard rate band for a single person rises to €46,500. The main personal tax credit increases by €125 to €2,125 (single) and €250 to €4,250 (jointly assessed), with the employee, earned income and home carer credits each rising. The entry point to the 2% USC rate also increases, to €30,300.

Housing

The rent tax credit rises to €1,150 (single) and €2,300 (jointly assessed/widowed) for 2027 and 2028. Help to Buy relief is extended, with the qualifying loan threshold rising to €35,000 (from €30,000). 

The rent-a-room relief threshold increases to €16,000, and a new, time-limited rent-a-room style exemption is introduced for income from renting a room in a qualifying “auxiliary dwelling”, such as a granny flat or garden room, between 27 July 2026 and 31 December 2030.

Childcare providers

For childcare providers, the childcare services relief threshold rises to €20,000. The existing limit on the number of minors a childminder may care for is also removed, subject to registration in the register of early years services.

Third-level 

Relief for third-level fees effectively increases, as the amount of fees automatically disregarded reduces to €2,350, or €1,175 for additional qualifying family members, from the 2026 year of assessment. 

Farmers

Farmers also benefit from enhanced reliefs. For new succession farm partnership applications made on or after 1 January 2027, the annual succession tax credit doubles to €10,000 and the related income cap increases to €250,000. The accelerated capital allowance for farm safety equipment is extended to 31 December 2029, with an expanded list of qualifying equipment.

The new Individual Investment Account

Sections 26 and 27 set out the detail of the much-heralded Individual Investment Account (IIA), a new statutory investment wrapper intended to give Irish individuals a simpler route into retail investment.

Individuals aged 18 or over may hold one account at a time and contribute up to €12,000 annually. Income, profits and gains on eligible investments — specified listed shares and bonds, ETFs, UCITS units and qualifying insurance-based investment products — are generally exempt from tax. Instead, an annual Investment Account Tax of 1% applies to the average value of investments and cash above a €50,000 threshold. Registered account providers will assume most of the administration, valuation, tax collection and reporting obligations.

The IIA presents an opportunity for banks, investment firms, insurers and other prospective providers. However, bringing products to market will require decisions on product design, systems and tax administration, as well as Revenue registration, ahead of the proposed July 2027 launch.

Investment funds, life assurance and ETFs

The Bill also eases the tax treatment of certain existing investment products.
Section 29 reduces the rate applying to relevant income and gains from Irish investment undertakings, life assurance policies and offshore funds from 38% to 35%, effective from 1 January 2027. 

Section 28 separately introduces a new, clearer regime for Irish investment fund units held through recognised clearing systems (relevant to Irish ETFs), while retaining the existing eight-year deemed-disposal concept. 

Alongside the IIA, these changes reflect a policy focus on encouraging retail investment though the wider deemed-disposal architecture remains unchanged. 

Research & Development Tax Credit

Section 25 enhances the Research & Development (R&D) Tax Credit, with changes to outsourced research, employee costs and the payment of credits.

The limit for qualifying R&D outsourced to universities and other third parties increases from the greater of 15% of expenditure or €100,000 to the greater of 20% or €200,000. 

A new, 5% uplift applies to qualifying R&D employee costs, subject to the company also incurring other non-R&D trading expenditure equal to at least 5% of those emoluments. 

The first payable instalment threshold also rises from €87,500 to €105,000, and any R&D tax credit instalments that are used as offsets against corporation tax for a period can now be used when calculating preliminary tax, rather than just the first instalment amount as previously allowed.

 

Financing and interest deductibility

Section 33 makes significant amendments to sections 247 and 249, which govern corporation tax relief for interest on borrowings used to acquire shares in, or lend to, qualifying companies.

The changes, generally applying from 1 January 2027, represent a welcome modernisation of several aspects of the interest relief rules. They include measures addressing foreign-currency funding and swaps, remove the common-director requirement and relax certain restrictions on connected-party lending. 

However, the revised treatment of borrowed funds and recovered capital will require companies to monitor how financing arrangements operate over time.

Relief under section 249 may be restricted where recovered capital is not reinvested or used to repay qualifying borrowings within the prescribed conditions. Investments in, or loans to, certain foreign entities treated as equivalent to Irish partnerships will also fall outside section 247 relief.

The changes will be particularly relevant to acquisition finance, holding-company structures, private equity, banking and insurance groups, and should be considered against live financing arrangements rather than only as part of the annual corporation tax compliance process. 

Section 34 separately extends the deadline for making certain Interest Limitation Rule (ILR) elections to two years after the end of the relevant accounting period. This gives groups managing complex interest positions additional flexibility, although group composition, interest capacity and the consequences of making an election should still be assessed early.

Preliminary corporation tax

Section 74 introduces welcome flexibility to the preliminary corporation tax rules for accounting periods commencing on or after 1 January 2027. 

The relevant limit for the small-companies regime increases from €200,000 to €350,000, allowing more companies to base their preliminary tax payment on 100% of the prior year period or 90% of the current period, with only one preliminary tax payment required. 

Companies that have paid at least 80%, but less than 90%, of their final corporation tax liability by the relevant preliminary tax deadline will be permitted to top up the payment to 100% within four months of the accounting period end, subject to the conditions set out in the legislation. 

For larger companies, the Bill also provides greater flexibility in calculating interest on late preliminary tax payments. The first instalment may be calculated by reference to the lower of 45% of the current period liability or 50% of the corresponding prior period liability, rather than solely by reference to 45% of the current period liability. 

Pillar Two

Section 72 is a major second-stage update to Ireland’s Pillar Two legislation, incorporating the OECD’s 2026 guidance and Side-by-Side package. 

Four new safe harbours are introduced:

  1.  Substance-Based Tax Incentive Safe Harbour.
  2.  Side-by-Side Safe Harbour.
  3.  Ultimate Parent Entity Safe Harbour.
  4.  Simplified Effective Tax Rate Safe Harbour.

The extension of the Transitional CbCR Safe Harbour, broadly to fiscal years beginning on or before 31 December 2027, also provides another valuable year of simplified compliance for affected groups. 

The new permanent safe harbours, however, should not be mistaken for automatic exemptions. Eligibility, elections and computational requirements will need to be assessed on a jurisdiction-by-jurisdiction basis.

While the Side-by-Side rules exempt certain groups from IIR and UTPR from 2026 onwards, importantly, Qualified Domestic Top-up-Taxes (QDTT) remain . 

Irish entities within qualifying groups may therefore continue to have an Irish Pillar Two liability. Groups should revisit their safe-harbour assessments, election processes and Irish QDTT exposure before relying on the revised provisions.

The Bill also updates GloBE Information Return filing rules and revises penalties, including a new €10,000 fixed component for late filings and an aggregate €1 million penalty cap for multiple Irish constituent entities within the same group.

Capital Taxes

The standard rate of Capital Gains Tax (CGT) has been reduced from 33% to 31% for disposals made on or after 7 October 2026. The separate 33% rate applying to disposals of development land remains unchanged.

The Capital Acquisitions Tax (CAT) thresholds have been increased, with the Group A threshold rising from €400,000 to €420,000, Group B from €40,000 to €44,000, and Group C from €20,000 to €22,000. The increased thresholds apply to gifts and inheritances taken on or after 7 October 2026.

VAT modernisation, e-invoicing and digital reporting

The Bill puts Ireland's move towards structured electronic invoicing and digital VAT reporting on a legislative footing, as part of the EU's VAT in the Digital Age (ViDA) programme.

For businesses within scope, the new requirements extend beyond VAT compliance. They will need systems capable of issuing and receiving structured invoices, reporting specified transaction data to Revenue and maintaining appropriate controls.

Although the legislative provisions take effect from 1 January 2027, mandatory implementation will be phased.

  •  Phase 1: 1 November 2028 - The first phase applies to accountable persons established in Ireland and administered by Revenue's Large Corporates Division (LCD) on 1 January 2027. All Irish businesses should also be capable of receiving structured electronic invoices from November 2028.
  •  Phase 2: 1 November 2029 - The regime expands to Irish-established, VAT-registered businesses engaged in intra-Community acquisitions or supplies of goods or services.

The mandatory requirements apply to taxable supplies only. Exempt supplies are not currently within scope, an important distinction for businesses in sectors with substantial VAT-exempt activities.

The legislation also distinguishes between suppliers and customers. Suppliers may be required to issue structured invoices and report the associated transaction data, but customers are not currently subject to an equivalent reporting obligation.

Businesses receiving structured invoices will need systems capable of processing the data, even where they have no reporting obligation themselves. For banks, insurers, asset managers, corporate service providers, special purpose vehicles (SPVs) and other affected businesses, implementation will require coordination across tax, finance and IT functions. Existing invoicing, reporting and control processes should be assessed against the new requirements. Further operational detail will follow through regulations and Revenue guidance. 

Section 54 also revises the domestic VAT exemption for payment-related transactions, replacing "negotiating or dealing in payments" with "transactions concerning payments".

Revenue has indicated that the amendment is intended to align Irish legislation with the EU VAT Directive and will not change the exemption's practical application, as the Directive's rules are already applied. The change therefore appears principally to concern legislative alignment rather than the substance of the exemption, although further Revenue guidance may clarify its practical application. 

Property taxes: RZLT and the new Derelict Property Tax

The Bill introduces a Derelict Property Tax, charged annually at 7% of the market value of a designated derelict property. Broadly, the tax applies to properties in specified built-up areas that are not in use, or suitable for use, as dwellings, business premises or specified community, transport, energy or other infrastructure. The population threshold for a qualifying built-up area is 4,000 or more in 2027, reducing to 2,000 or more from 2028.

Local authorities will prepare annual preliminary and final registers, with rights for owners and third parties to make submissions and appeal relevant decisions. The first annual liability date is 1 March 2028, with returns and payments due by 23 June 2028.

Exemptions and deferrals apply in specified circumstances, including properties affected by defective concrete blocks, relevant court orders or ongoing legal proceedings, changes of ownership and periods of active remediation works. A credit is also available for Local Property Tax or Vacant Homes Tax already paid on the same property for the relevant period.

At 7% of market value annually, the tax could represent a substantial cost for owners of qualifying properties, particularly sites held pending planning, funding or remediation decisions. Property owners and investors should review their portfolios against the new criteria and assess whether exemptions or deferrals may apply.

Landowners will have a further opportunity to seek the rezoning of land, which could provide an exemption from RZLT for 2027, which could remove the land from scope of the Residential Zoned Land Tax for 2027. Applications must be made to the relevant local authority by 30 April 2027 but will not be available where the land is subject to an existing planning permission or current planning application for residential development.

Additional measures

  • Bank and financial institution levies: The bank levy is extended to 2027. The further levy on certain financial institutions continues at 0.1025% of the assessable amount for 2026 and 2027.
  • Excise and carbon taxes: mineral oil, natural gas and solid fuel carbon tax rates are updated, and VRT Category A bands increase (broadly by 1 percentage point across most bands) from 1 January 2027.
  • Tobacco and e-liquids: tobacco products tax increases, and a new e-liquid products tax of €700 per litre applies from 1 January 2027.
  • Betting duty: the existing betting and remote betting duty regime is replaced by a single betting intermediary and pool betting duty of 25% of the relevant commission or taxable amount, from 1 January 2027.
  • R&D and start-up relief: the start-up company relief from corporation tax is extended to 31 December 2030.
  • Heritage items: the annual cap on tax settled by donation of heritage items increases to €12 million.
  • Health insurance levy: redefined rules, including a pro-rata repayment mechanism where cover ceases early, from 1 April 2027.
  • Technical and administrative changes: a range of other amendments update PAYE reporting references, double taxation agreements, agricultural de minimis aid rules and advance pricing agreement payment dates.

* Basis and caveat: This article summarises Finance (No. 2) Bill 2026 as initiated on 19 October 2026. It provides an overview of the principal provisions and does not replace the legislation or detailed tax advice. The provisions may be amended during the legislative process, and application dates should be checked for each measure.