Budget 2027 strengthens Ireland’s existing innovation and Foreign Direct Investment ("FDI") offering through a number of welcome simplification measures, which as set out in our pre-Budget insights is core to Ireland maintaining its position as a leading jurisdiction for FDI. However, the Budget should largely be considerd an evolution rather than a revolution of the existing Corporate Income Tax regime. The opportunity to align tax policy more directly with Ireland’s stated ambitions to be a leader in AI and emerging technologies as set out in its Digital and AI Stratefy published earlier in 2026, has not been realised in Budget 2027.  

A summary of the key updates to the Irish CIT regime that will be most impactful for large MultiNational Groups investing in Ireland as follows; 

Innovation / R&D 

  • Budget 2027 has introduced some welcome improvements to the regime, particularly the increased outsourcing limits, higher first-year payment threshold and simplification measures, which should make the regime more accessible for smaller R&D projects. The clinical-trials change is particularly relevant for Ireland’s life-sciences sector, a core pillar of the Irish economy, and should reduce the administrative burden associated with qualifying R&D activities being undertaken by life sciences MNCs operating in Ireland.
  • However, it is a missed opportunity for a more radical reform around AI. The Government’s Digital and AI Strategy aims to position Ireland as a leading digital nation and a global hub for applied AI innovation and regulation. In this regard, a second-tier innovation credit targeting the development and adoption of AI and other emerging technologies would have complemented the existing R&D regime, which sets a higher bar for qualifying spend and is dependent on resolving scientific and technical uncertainty,  and would have provided a strong differentiator for Ireland in competing for the next generation of FDI. This should be a key focus for implementation in Budget 2028.  
  • The five-year extension of the Knowledge Development Box (“KDB”) has the potential to be significant for scaling innovative businesses below the €750m Pillar Two consolidated revenue threshold. It provides an important incentive to develop and commercialise qualifying IP in Ireland, complementing the R&D tax credit. However, the take up of the KDB regime has historically been low so it will be interesting to see if the Finance Bill includes any significant changes to the regime.  

Simplification measures  

As set out in our pre-budget insights, 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.  

Budget 2027 has introduced certain welcome simplificaiton measures which illustrate that Ireland remains fully aligned with international standards while also being practical, responsive and business-friendly.  

Interest Regime 

The existing interest regime is one of the most complex areas of Irish corporate tax legislation, particularly for groups managing financing structures across borders and requires significant reform. The Minister for Finance in previous Budget’s set out a statement aim to reform the regime, and initiated a consultation process to establish meaningful legislative changes to the regime with input from key stakeholder. The Minister has confirmed that Budget 2027 will introduce simplification of Ireland’s interest relief rules which is welcome and should offer greater clarity and certainty around financing costs improving the overall ease of doing business for international groups investing in and through Ireland. The Finance Bill will contain the details as to the extent of the changes to the existing regime.  

Preliminary Corporate Tax Payments 

The Minister for Finance has announced a number of changes to the preliminary corporation tax regime for larger corporate tax payers operating in the state, with the changes aimed at simplifying the existing system which was overly complex and reducing the administrative burden on businesses. The changes include  

  • an increase in the “large” company threshold from €200,000 to €350,000 allowing more companies to avail of simplified preliminary tax rules under the "small" company rules, and  
  • a reduction in the quantum of the preliminary corporation tax payment required for large companies from 90% to 80% of the estimated current-year corporation tax liability, with the balance payable within four months of the financial year-end.

Pillar Two 

Targetted simplification measures to the Pillar Two rules, the Side-by-Side Package, were ratified at OECD level in January 2026, with the stated primary aim to simplify the obligations for large MNCs that are headquartered in a jurisdiction that operates a tax regime tax with a similar policy as the Pillar Two rules, namely the US. Budget 2027 has confirmed that the simplification measures will be embedded into Domestic Legislation, which will include a one-year extension of the Transitional Country-by-Country Reporting Safe Harbour a Permanent Simplified Effective Tax Rate Safe Harbour, and the aforementioned SbS package. This illustrates Irelands continued commitment to tax reform in line with International best practice- further details of the legislative updates will be included in the Finance Bill.  

RSM's View

Budget 2027 contains welcome measures for investment, innovation and enterprise and again illustrates that Ireland remains committed to robust international tax standards; however, it is equally committed to keeping the tax system business friendly, with the simplification measures aimed towards reducing compliance pressure, improving certainty, and ultimately strengthening Ireland’s attractiveness as a destination for investment.  The detail on some of the simplification measures, particularly in relation to the extent of the reform of the interest regime changes will only become clear through the Finance Bill

However, Budget 2027 is an evolution of the existing CIT regime, rather than a revolution, and there is room for further significant improvement in upcoming Budgets and in particular the introduction of an innovation credit targeting the development and adoption of AI and other emerging technologies would have complemented the existing R&D regime, and clearly illustrates Ireland’s stated ambitions to be a leader in AI and emerging technologies. 

Key contacts

Paddy Stapleton
Head of Tax
Seán McCarthy
Corporate Tax Partner - International

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

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