Budget 2026 analysis: Indigenous and FDI businesses

Budget 2026 set out a number of measures of interest to business, both indigenous and foreign direct investors (FDI).

Indigenous businesses

Of particular interest to the SME and indigenous sector is the increase in the cap on Revised Entrepreneur Relief. Where certain conditions are met, this relief provides for a reduced CGT rate of 10% on disposals of business assets, including shares in trading companies. While this rate compares favourably to the headline CGT rate of 33%, one of the highest in the EU, it currently only applies to the first €1 million of qualifying gains, above which the standard rate applies; entrepreneurs will therefore be pleased by the proposed increase to €1.5 million due to apply from 1 January 2026.

Another interesting measure is an exemption from stamp duty on transactions in shares of Irish SMEs and start-ups trading on regulated markets whose market capitalisation is less than €1 billion. This change is very much in keeping with a stated policy goal for the expansion of Irish indigenous business and to develop Ireland’s exporting base, thereby reducing reliance on foreign multinationals. It is also hoped that it might encourage early-stage businesses looking to list to do so on the Irish market.

The stamp duty exemption may also be of interest to investors, along with the reduction from 41% to 38% in the exit tax applicable to gains realised on certain fund and life assurance-based investment products. Investors will be disappointed however that the “deemed disposal” rule, which applies this gain on unrealised gains after eight years, is not being amended.

FDI sector

The FDI sector will welcome the proposed changes to the R&D corporation tax credit, which is to be increased from 30% to 35%, with the year one refund also being increased from €75,000 to €87,500. This latter change is also likely to appeal to claimants in the SME sector. The publication of an R&D Compass in the coming weeks, considering targeted changes to the credit, will also be closely watched.

Finance Act 2024 saw the introduction of a participation exemption for dividends, broadly exempting certain overseas dividends from Irish corporation tax. This change was beneficial to Irish-headquartered businesses as it simplified the taxation of foreign dividends, albeit that it is in need of further finessing. These businesses will welcome the announcement in Budget 2026 of an expansion of the exemption to certain jurisdictions operating non-refundable withholding taxes and of the intention to introduce some technical amendments to simplify the operation of the exemption; this is something to watch out for in Finance Act 2025.

Finally, the announcement that a roadmap will be published shortly with a view to introducing legislation this time next year in Finance Act 2026 to simplify the interest deductibility rules has generated considerable interest as this is a challenging area for business more generally.

Budget 2026 contained quite a number of announcements of interest to business. Finance Act 2025, due shortly, will be closely watched, as the devil will be in the detail.

Our Budget 2026 webinar, featuring leading economic analyst and commentator Jim Power along with a panel of Crowe Ireland experts moderated by tax partner Claire Davey, is now available to view on demand. Click here to to find out more about what Budget 2026 means for business owners across all sectors.