Strengthening Ireland’s position as a global FDI hub

Budget 2026: strengthening Ireland’s position as a global FDI hub

In the competitive landscape of global investment, Budget 2026 represents a strategic opportunity for Ireland to reinforce its attractiveness as a destination for foreign direct investment (FDI).

For decades, Ireland’s open economy has benefited significantly from FDI, particularly from large U.S. investments in the technology and pharmaceutical sectors. While this model has delivered substantial economic benefits, recent external developments have highlighted its vulnerabilities, particularly a disproportionate reliance on a narrow base of multinationals.

Shifting U.S. trade policies, rising global tariff pressures, and ongoing changes to the international tax landscape have placed Ireland’s fiscal model under closer scrutiny, have underscored the need for diversification and structural resilience.

While developing a robust indigenous sector remains a government priority – supported by the recently launched Action Plan on Competitiveness – Ireland must also ensure that its FDI policy continues to attract high-quality, long-term international investment.

Maintaining this balance is critical to sustaining economic growth and job creation in a global environment that is increasingly uncertain and competitive.

Corporate tax: simplifying and modernising the regime

The Irish corporate tax regime has been subject to unprecedented changes over the past number of years to ensure Ireland’s alignment with the measures and actions set out under the OECD BEPS Action Plan.

These included, among others, changes to tackle hybrid mismatches, interest deductibility, mandatory cross-border disclosure regime, and prevention of tax treaty abuse. Alongside this, a once-in-a-generation reform to the corporation tax system was introduced through Pillar Two legislation – a global endeavour to enforce minimum tax standards and apply specific rules to address the tax challenges of the digital economy.

While these measures have illustrated Ireland's continued proactive stance to curtail tax avoidance through significant international tax reform, it has resulted in Ireland’s corporate tax framework being increasingly complex, creating significant compliance costs and legal uncertainty for MNC Groups operating in Ireland.

Budget 2026 provides an opportunity for the Government to build on the participation exemption introduced in Budget 2025, to enhance clarity, reduce complexity, and increase Ireland’s appeal for long-term investment, all of which will support sustainable economic growth and reinforce Ireland’s status as a leading FDI destination.

R&D and technology innovation tax credits

Ireland’s R&D tax credit has long been a cornerstone of the country’s innovation and economic strategy, attracting multinational investment and supporting the growth of domestic enterprises. The Department of Finance commenced a consultation earlier this year to assess its continuing relevance, cost, impact, and efficiency of expenditure.

In our view, and to ensure Ireland remains globally competitive in a rapidly evolving technological landscape, Budget 2026 should both expand traditional R&D incentives and introduce a dedicated technology & digital innovation credit.

This investment would recognise the increasing importance of digital transformation, artificial intelligence, software development and advanced analytics. It would also acknowledge other technology-driven innovations that may not fall neatly within traditional R&D categories but are critical to modern business growth. Moreover, it would support Irelands position as a global hub for technology-driven innovation, and accelerate commercialisation of innovation, directly contributing to economic growth, job creation, and productivity.

Accelerate the processing of the credits to improve cash flows for all R&D and technology claims;
broadened qualification and a technology and digital innovation credit: the Irish R&D credit in its current form is aligned to OECDs “scientific uncertainty” which does not necessarily align with Ireland’s broader digital, and AI strategies. The introduction of a broader digital credit, aimed towards rewarding practical innovation (improving processes, adopting new tech), and would encourage technology-focused innovation beyond traditional scientific R&D, and;
simplified documentation: reduce compliance burdens through templates, online portals, and lighter reporting requirements.

Participation exemption for foreign dividends and foreign branch exemption

The participation exemption, introduced in Budget 2025, represented a key step toward simplifying Ireland’s corporate tax system, however, there are limitations to the exemption that prevent its full operational effectiveness, such as the five-year look-back rule and restricted geographic scope.

Budget 2026 must seek to address some of the limitations of the exemption in its current form. Specifically, the government should introduce a foreign branch profits exemption. This should be cost neutral and would align Ireland with international best practices. The UK have operated a foreign Branch exemption for over 10 years, and our current system is out of step with international best practice and cumbersome to administer for multinational businesses operating from Ireland.

This would represent a non-controversial, revenue neutral and effective reform to simplify Ireland’s regime for cross border investment, and importantly, ensure greater alignment between the taxation of foreign branches and foreign subsidiaries.

Reform of interest deductibility rules

Ireland’s corporate tax framework has grown increasingly complex due to the EU’s Anti-Tax-Avoidance Directives (ATAD), particularly interest limitation rules. In previous budgets, the Finance Minister announced a commitment to engaging with stakeholders on Ireland’s current regime for interest deductibility, noting its complexity, with a view to seeing a simplification to the regime. A formal consultation commenced in September 2024 with the consultation focusing on all aspects of the regime, including taxation of interest income, the deductibility of interest costs, and application of the interest limitation rules.

Budget 2026 should mark a first step towards the simplification of the interest regime, with some key measures that would enhance the offering being changes to the deductibility of interest as a charge (reducing the compliance burden, and simplifying the recovery of capital rules), simplification of the withholding tax rules, and crucially, allowing the application of the 12.5% rate of CIT to interest income.

Talent and employee incentives

Irelands position as a global FDI hub is predicated on the ability of large MNCs to attract and retain highly skilled talent, which is always a key metric that is reviewed as part of any MNCs Global expansion.

Budget 2026 must strengthen key programmes to support mobility, innovation, and the retention of employees.

Share-based remuneration

Share-based remuneration is a critical tool for attracting and retaining talent in Ireland’s high-growth and technology sectors. It aligns employee interests with company performance, incentivises innovation, and supports long-term growth, particularly in SMEs and scale-ups that may not be able to offer the same cash compensation as larger multinationals.

In 2024, the Department of Finance commissioned an independent review of share-based remuneration, with some key recommendations identified as part of this review.

Recommended reforms include:

encouraging uptake of KEEP through reform of the current regime;
introducing an apportionment model for RSUs to align tax liability with periods of Irish residency and reduce potential double taxation, and;
streamlining reporting for employers through digital portals and simplified approval processes.

These measures would make share-based compensation simpler, fairer, and more widely accessible, ensuring Ireland remains competitive in attracting and retaining a skilled workforce.

Special Assignee Relief Programme (SARP)

FDI investment is dependent on attracting senior executives to new and existing operations from overseas operations. Attracting key talent from overseas strengthens FDI investments and contributes positively to the talent pool of ‘Ireland’s Inc’ that is critical in continuing to drive economic success.

The Special Assignee Relief Programme (SARP) is a key tool in attracting senior executives, and an important temporary relief on relocating to Ireland, considering our marginal tax rate for individuals is one of the highest in the OECD.

The competition for talent globally for multinational investment is real, and the importance of this relief cannot be underestimated.

The regime was first introduced in 2012, and it has been granted extension over successive Budgets in intervening years. Budget 2026 presents an opportunity to not only extend the availability of the relief beyond 31 December 2025 but committing to a long-term horizon and make the programme permanent.

Changes to enhance the regime would include:

1. remove the current cap for relief of €1m. This would send a clear message Ireland is serious about attracting the highest level of executives to Ireland;

2. broadening the €100,000 qualifying threshold to include bonuses, commissions, and equity remuneration;

3. remove the requirement for qualifying individuals to have worked for at least 6 months overseas with the same employer (new and existing FDIs will attract external recruits to work in their Irish operations & it is unfair that they should be excluded from this relief);

4. extending relief to USC and/or PRSI, and;

5. extending the 90-day from arrival application period to 180 days.

Building a sustainable and competitive future

Budget 2026 offers a unique opportunity to build on past reforms, simplify Ireland’s corporate tax system, and strengthen incentives for innovation and talent. By implementing targeted corporate tax and employee-related measures, Ireland can maintain its FDI attractiveness, support sustainable growth, and enhance its reputation as a leading global investment hub.