Budget 2027: FDI and corporate tax

Budget 2027: tax simplification must be a competitiveness priority

Ireland’s corporate tax regime has changed significantly in recent years as the State has responded to evolving international tax standards. Those changes have been necessary, and Ireland has rightly maintained its commitment to a stable, transparent and rules-based tax environment. However, the cumulative effect for many large multinational groups has been a materially more complex compliance landscape, with Pillar Two being the latest and most prominent example.

The European Commission’s recent tax simplification package with a stated objective to streamline compliance, reduce administrative burdens and strengthen competitiveness across the Single Market is a timely reminder for that tax policy can play a key role in supporting economic growth and investment. Ireland should take a similar approach domestically. 

Budget 2027 is an opportunity to show that Ireland can remain fully aligned with international standards while also being practical, responsive and business-friendly.

Budget 2027 represents an opportunity for the Government to advance a clear simplification agenda to ensure the rules are proportionate, and easier for businesses to apply in practice, without moving away from international best practice. 
 

What would tax simplification mean for businesses?

Tax simplification should be a key consideration in Budget 2027. Ireland continues to compete intensely for foreign direct investment, particularly as businesses assess where to locate high-value functions, innovation activity and regional headquarters. Tax is only one part of that decision, however companies increasingly value certainty, efficiency and ease of doing business. A regime that is technically robust but difficult to navigate risks diverting resources away from investment, growth and strategic decision-making. 

For clients, tax simplification would have a very practical impact as finance and tax teams are faced with ever increasing reporting obligations, which is consuming more time and cost, particularly for groups operating across multiple jurisdictions. Reducing unnecessary complexity would allow companies to redirect effort from process and administration towards planning, investment and value creation. It would also improve certainty - where rules are overly complicated, businesses can struggle to reach timely decisions or to explain their Irish tax position to stakeholders overseas. Clearer rules make Ireland easier to understand and easier to recommend as an investment location, and in a competitive FDI environment, that is a tangible advantage.

Three measures Budget 2027 could present to make a meaningful difference

1.    R&D tax credit reform

First, the Government should continue to reform the R&D tax credit regime. Ireland has already made important changes to the regime; however, Budget 2027 should go further by simplifying the regime and ensuring it reflects how innovation is carried out in today's world. That includes considering whether qualifying activities are sufficiently broad to capture emerging technologies and new ways of undertaking research and development. A modern R&D regime would support both multinational investment and the scaling of indigenous Irish businesses.

2.    Interest regime reform

Second, Ireland needs comprehensive reform of its interest regime. This remains one of the most complex areas of Irish corporation tax, particularly for groups managing financing structures across borders. The Government’s recent consultation process and feedback statement should now lead to meaningful legislative change. A clearer, more coherent interest regime would reduce uncertainty and support Ireland’s position as a location for international business operations.

3.    Participation exemption expansion

Third, the Government should progress the long-signalled extension of the participation exemption to foreign branch profits. A branch participation exemption would broadly be cost neutral to the Exchequer and would align Ireland more closely with international best practice and simplify the taxation of overseas branch profits.

Get in touch if you have any queries you might have in relation to Budget 2027.