Linkedin
Facebook
Email
more
Following the Budget 2026 announcements, Finance Bill 2025 provides the legislative measures to introduce targeted enhancements to Ireland’s tax incentive framework, reinforcing the country’s commitment to innovation, digital development, and creative industries. The Bill is expected to be signed into law before the end of 2025.
We examine the key proposed changes below.
Research and Development Tax Credit (RDTC)
Increased credit rate and first year threshold
The RDTC rate will increase from 30% to 35% from 1 January 2026. This marks the second uplift in two years and reflects Ireland’s strategic focus on attracting and retaining R&D investment.
In addition, the first-year payment threshold will rise from €75,000 to €87,500. This threshold determines the amount of RDTC that can be paid in full in the first year rather than spread over three instalments, providing a cash flow boost, particularly for smaller claims.
Simplified labour cost claims
To streamline the claims process, a new deeming provision will allow companies to treat 100% of an employee’s salary and emoluments as qualifying R&D expenditure where the employee spends at least 95% of their time on eligible R&D activities. This simplification aligns Ireland’s regime with international best practice and reduces administrative burden for companies with dedicated R&D staff.
Expanded building credit eligibility
The Bill also extends RDTC eligibility to include construction costs for laboratories used in R&D, even where such facilities do not qualify for industrial buildings allowances. Expenditure on office areas or ancillary office functions within laboratories remains excluded. This change is expected to benefit companies investing in specialised R&D infrastructure outside traditional manufacturing environments.
Looking ahead: the R&D compass
Separate to the proposed legislative updates, the Department of Finance is expected to publish an R&D Compass in the coming weeks. This strategic document will outline the future direction of Ireland’s innovation supports and may address practical enhancements identified during the 2025 public consultation.
At RSM, we have consistently advocated for:
- Increased relief for outsourced R&D to address talent shortages.
- A 50% enhanced credit for SMEs to stimulate domestic entrepreneurship.
- Simplified claims processes and accelerated refund timelines for SMEs.
The Compass is expected to align the R&D regime more closely with industry practice and set the pathway for broader innovation supports.
Section 481 Film Tax Credit – Visual Effects (VFX)
The Section 481 Film Tax Credit currently provides a 32% corporation tax credit on eligible production expenditure up to €125m per film. Finance Bill 2025 provides for an enhanced 40% credit for productions with at least €1m in eligible VFX expenditure, applicable to qualifying spend up to €10m. Expenditure above this threshold will continue to qualify for the standard 32% rate. This measure is designed to bolster Ireland’s competitiveness in attracting high end VFX projects and is subject to European Commission approval.
Section 481A Digital Games Tax Credit (DGTC)
The DGTC, introduced in 2022, offers a 32% credit on eligible expenditure up to €25m per digital game. Finance Bill 2025 provides for a six-year extension of the DGTC to 31 December 2031, offering long term certainty for developers and investors in Ireland’s growing digital games sector.
Additionally, the Bill introduces an enhancement to allow claims for post release content, subject to certain conditions. This includes digital content developed after a game’s release, provided an interim certificate has been issued for the original game. Both enhancements are subject to European Commission State aid approval.
Conclusion
Finance Bill 2025 represents a significant step forward in Ireland’s innovation and creative economy. The changes enhance and refine Ireland’s innovation supports, ensuring they remain responsive to industry needs and global competitiveness.
The measures provide greater clarity, improved cash flow, and expanded eligibility across key regimes, while the forthcoming R&D Compass is expected to set out a longer-term vision for Ireland’s innovation policy.
At RSM, we welcome the progress made and believe that the forthcoming R&D Compass offers an opportunity to deliver further reforms that will strengthen Ireland’s position as a global leader in research, creativity, and digital innovation. With the right balance of immediate measures and long-term vision, Ireland’s future as a hub for cutting edge development is bright.
