Finance (No. 2) Bill 2026: What Irish businesses need to know

Finance (No. 2) Bill 2026 introduces a number of proposed tax changes that could affect Irish businesses and SMEs, spanning corporation tax, R&D, investment and funding, employer reporting and VAT. The measures present both opportunities and practical considerations, with some requiring advance planning and changes to existing processes or systems.

Bitesize summary

Finance (No. 2) Bill 2026 contains a range of measures that could affect how Irish businesses manage tax payments, fund growth, invest in innovation and meet their reporting obligations over the coming years. Among the most significant changes are an increase in the small-company preliminary tax threshold, enhancements to the R&D tax credit, and new digital VAT requirements.

Businesses should consider the potential impact now, particularly where changes to tax planning, record-keeping or finance systems may be required.

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Corporation tax changes for growing businesses

One of the more practical changes for SMEs relates to preliminary corporation tax.

For accounting periods commencing on or after 1 January 2027, the threshold for a company to qualify as a "small company" for preliminary tax purposes will increase from €200,000 to €350,000.

Companies falling within the threshold can make one preliminary tax payment annually. This can be calculated based on either 100% of the previous year's liability or 90% of the current year's liability.

The increased threshold should bring more Irish companies within the simpler preliminary tax regime.

The Bill also introduces a new top-up mechanism where a company's preliminary tax payment falls short of 90% of its final liability. Provided at least 80% of the final current-period liability has been paid by the normal deadline, a company will be able to make a top-up payment four months after the end of the accounting period, bringing the total preliminary tax paid to 100%.

This could give businesses additional time to finalise their tax position and reduce the risk associated with estimating their liability too early.

Companies should review their expected 2027 liabilities and determine whether entities that were previously outside the small-company regime could now qualify.

Further support for start-ups

The corporation tax relief available to new trading companies is also being extended. It will apply to qualifying companies beginning a new trade between 1 January 2027 and 31 December 2030.

For entrepreneurs considering establishing a new trading company, the extension provides greater certainty that the start-up relief will remain available over the coming years, subject to the relevant eligibility conditions and limits.

Changes to acquisition and investment funding

The Bill also proposes a number of amendments to the rules governing interest deductions under Section 247 TCA 1997.

A particularly useful change is the removal of the requirement for a common director to be in place between the investing and investee company, or a connected company, at the time the relevant loan is applied.

Other amendments seek to simplify the operation of the recovery of capital and reinvestment provisions.

These changes could be relevant where businesses are considering acquisitions, management buyouts, group reorganisations or holding-company structures. Financing arrangements should therefore be reviewed carefully as part of the planning process.

Enhanced support for R&D and innovation

The Bill includes several significant enhancements to the R&D corporation tax credit.

The minimum first instalment of an R&D credit that may be claimed in full in year one will increase from €87,500 to €105,000, potentially providing an earlier cash-flow benefit to qualifying businesses.

The limits applying to certain outsourced R&D costs will also increase. Qualifying expenditure outsourced to a university or other third-level institution will be subject to a limit of the greater of 20% of the company's own R&D expenditure or €200,000. The same increased limit will apply to qualifying R&D outsourced to an unconnected third party.

A further change will allow qualifying companies to claim 105% of certain R&D staff pay as R&D expenditure, subject to detailed conditions. This is intended to recognise R&D support costs that would not otherwise qualify and will apply for accounting periods ending on or after 23 December 2027.

Companies involved in areas such as software development, engineering, science, product development and other forms of technical innovation should use the period ahead to review how R&D projects and employee time are documented. Strong contemporaneous records remain important when supporting an R&D tax credit claim.

Knowledge Development Box extended

The Knowledge Development Box (KDB) will be extended for a further five years, until 1 January 2032.

The Bill also introduces a once-off opportunity for businesses to opt certain existing qualifying IP assets out of the KDB regime. This could be particularly useful where an asset is no longer producing sufficient profits for continued participation in the regime to provide a meaningful benefit.

Businesses with qualifying intellectual property should consider whether their existing KDB elections continue to deliver value.

Changes to employer reporting requirements

Employers will also see changes to the timing of Enhanced Reporting Requirements covering certain tax-free benefits and payments, including travel and subsistence payments, the remote-working daily allowance and the small benefit exemption.

From 1 January 2027, employers will have the choice of continuing to report certain payments in real time or moving to monthly reporting, with information due by the 14th day of the following month.

Businesses should ensure that payroll processes are updated appropriately and that responsibility for reporting these payments is clearly established internally.

Preparing for digital VAT reporting

Perhaps one of the most significant longer-term operational changes is the move towards structured e-invoicing and digital VAT reporting.

From 1 November 2028, new requirements will begin to apply to domestic business-to-business and business-to-government transactions. The requirements will initially apply to companies within Revenue's Large Case Division, before extending further from 1 November 2029.

Although implementation is still some time away, this should be viewed as a finance systems project rather than simply another tax compliance requirement.

Businesses should consider whether their existing accounting and invoicing software will be capable of supporting structured electronic invoicing and digital VAT reporting. Invoice data and VAT records should also be reviewed, as accurate and consistent underlying data will become increasingly important.

Any business currently replacing or upgrading its finance system should take the future requirements into account now rather than having to make further changes closer to implementation.

What should businesses do now?

Finance (No. 2) Bill 2026 presents opportunities for businesses to simplify tax payments, improve access to R&D support and reconsider funding structures. At the same time, the move towards digital VAT reporting will require forward planning.

Businesses should assess which measures are likely to affect them, update financial forecasts where necessary and review whether changes will be needed to their systems, tax processes and record keeping.

As the Bill may be amended before enactment and certain provisions have specific commencement requirements, businesses should seek advice before implementing changes based on the proposed measures.

How Crowe can help

Our tax team can help you assess how the measures contained in Finance (No. 2) Bill 2026 could affect your business and identify where action may be required. This could include reviewing corporation tax obligations, R&D tax credit claims and funding structures, as well as preparing for changes to employer reporting and digital VAT requirements.

With a number of measures due to take effect over the coming years, early planning can help businesses identify potential opportunities and prepare their systems, processes and tax arrangements for change.

Talk to our tax team to understand what the proposed changes could mean for your business and the steps you should consider taking now.

Download our full summary of the Finance (No. 2) 2026 Bill here.