Irish Budget 2027: Key Tax Measures for the Financial Services Industry

The Minister for Finance announced Budget 2027 on 6 October 2026. For the financial services and funds sector, the package offers targeted refinements rather than major reform. Key measures for the sector include a lower exit tax rate for investors in Irish funds and life assurance policies, clearer rules for Irish exchange-traded funds (ETFs), a new Retail Investment Account and a cut in capital gains tax (CGT). Banking, insurance and asset management groups should also note the Pillar Two changes and targeted amendments to interest relief. However, the eight-year deemed disposal rule for funds remains unchanged.

We summarise below the measures likely to be of most interest to our clients.

Irish Regulated Funds, Life Assurance and Retail Investment

Funds and savings were again at the centre of this year's tax package. The cut in the exit tax rate and the new Retail Investment Account show a continued push to channel domestic savings into capital markets. However, as we explain below, the Budget stops short of the more fundamental reform the industry had been seeking.

Key measures:

• Exit tax cut:  From 1 January 2027, the rate of Investment Undertaking Tax (IUT) on investors in Irish domiciled funds will fall from 38 per cent to 35 per cent. The same cut applies to Life Assurance Exit Tax (LAET), equivalent offshore funds and certain foreign life assurance policies. Any reduction is welcome.

• Irish ETFs: The Minister also committed to simplifying the legislation for the retail investment regime, with a focus on clarifying how ETFs are taxed. The Finance Bill will introduce a new section for investors in Irish-domiciled funds whose units are held in a recognised clearing system, including Irish ETFs. Their treatment will be aligned with the rules for other Irish funds, at the new 35 per cent rate. The reduced rate will also apply to equivalent offshore ETFs taxed under the offshore funds regime. This should bring welcome certainty for Irish-domiciled ETFs and their promoters.

While the above measures are welcome, they fall noticeably short of addressing some of the key barriers to greater Irish retail investor participation in Irish regulated funds.

Most notably, no changes have been made to the eight-year deemed disposal regime, notwithstanding the longstanding view that it acts as a material disincentive to Irish retail investment in Irish regulated funds. It is therefore disappointing that reform has again been postponed pending the wider review of the retail investment regime. Although that review is intended to examine issues such as tax rates, deemed disposal and the administrative burden on investors, the lack of any immediate changes represents a missed opportunity. In addition, the differential between the standard rate of CGT and the rates applicable to IUT and LAET remains unaddressed.

New Retail Investment Account

The headline measure for retail investors, and a new distribution opportunity for fund managers, insurers and investment firms, is the new Investment Account. It follows the European Commission’s 2025 recommendation on Savings and Investment Accounts and the Department of Finance’s August 2026 roadmap on the taxation of retail investment. The key parameters are:

•  Providers will launch the account on 1 July 2027. It will be open to Irish-resident individuals aged 18 and over who hold a Personal Public Service Number (PPSN), with one account per person at launch.

• No tax will arise on account value up to €50,000. Value above that threshold will be taxed at a flat 1 per cent a year, based on the average of daily account values.

• Contributions will be capped at €12,000 a year. There is no minimum contribution or holding period, and money can be withdrawn at any time without a tax charge.

• Investments in the account will sit outside the existing retail investment regimes. No CGT, dividend withholding tax, IUT or LAET will apply, nor will the deemed disposal rule.

• Eligible investments will initially be limited to shares, bonds, investment funds and insurance-based investment products.

• Providers will be MiFID-authorised firms, regulated fund managers and insurance companies. They will manage all tax reporting, administration and payment, so account holders will not need to interact with Revenue (the Irish tax authority).

Wider Financial Services Measures

Beyond the retail investment sector, Budget 2027 contains a number of measures of broader relevance to financial services businesses. These include updates to Ireland's Pillar 2 framework, reforms to interest relief, changes to preliminary tax rules and a reduction in the standard rate of CGT.

Key measures:

• Pillar 2: Ireland’s Pillar Two legislation will be amended to implement the OECD Side-by-Side Package agreed in January 2026. The package extends the Transitional CbCR Safe Harbour. It also introduces four new safe harbours: the Simplified Effective Tax Rate Safe Harbour, the Substance-based Tax Incentive Safe Harbour, the Ultimate Parent Entity Safe Harbour and the Side-by-Side Safe Harbour. The changes will also reflect OECD Administrative Guidance published in May and September 2026 and update the penalty and filing provisions. Large banking, insurance and asset management groups within scope should consider which safe harbours may be available to them. They should also review how the changes interact with their existing QDMTT and IIR/UTPR positions and filing processes.

• Interest relief: Finance (No. 2) Bill 2026 will include targeted amendments to simplify interest relief on borrowings taken out for certain lending and investment activities. This builds on the October 2025 Action Plan for Reform of Ireland’s Taxation Regime for Interest, which sets out a phased roadmap to modernise the corporate tax treatment of interest. The detail will matter for lending structures, credit funds, acquisition finance and holding company arrangements, where the current rules can restrict relief or add complexity.

• Preliminary tax: The preliminary corporation tax rules will be relaxed. A company will meet its obligations if it pays at least 80 per cent of its liability by the final instalment date and tops up to 100 per cent within four months of its year end. The threshold for small company status also rises from €200,000 to €350,000.

• Capital gains tax: In a significant reform, the standard rate of CGT will fall from 33 per cent to 31 per cent for disposals on or after 7 October 2026. The 33 per cent rate for development land is unaffected. The cut is directly relevant to exits from portfolio investments, share sales and the timing of disposals by institutional investors, sponsors and management teams.

• Banks: The bank levy has been extended in its current form for 2027, with a target yield of €200 million. AIB, EBS, Bank of Ireland and PTSB remain the liable institutions.

Other Key Measures

The remaining measures mainly adjust personal tax bands and credits, continue existing reliefs and support housing.

Key measures:

• Derelict Property Tax: A new tax will apply to residential and non-residential properties recorded on local authority registers of derelict properties, at 7 per cent of the property's self-assessed value; owners will be able to seek a review of a property's inclusion. Important questions remain about what precisely constitutes a "derelict property" and how the proposed exemptions, deferrals and reliefs will operate, and further detail is expected in the Finance Bill.

• Residential Zoned Land Tax (RZLT): As in previous years, landowners whose land is on the draft local authority map for 2027 will have a further chance to seek a rezoning that reflects the genuine economic activity carried out on the land, and an exemption from the 2027 RZLT liability may be available where such a request is made.

• Housing reliefs: The maximum Help to Buy refund rises by €5,000 to €35,000 with effect from 7 October 2026. The Rent a Room limit rises from €14,000 to €16,000, and the relief is extended to newly installed detached auxiliary dwellings of 32 to 45 square metres, with retrospective effect from 27 July 2026. The Rent Tax Credit rises to €1,150 for single claimants and €2,300 for couples.

• Personal tax: The standard rate band rises by €2,500 to €46,500. The Personal, Employee and Earned Income tax credits each rise by €125, and the Home Carer Tax Credit rises by €100. The ceiling of the 2 per cent Universal Social Charge (USC) band also rises from €28,700 to €30,300.

• Social insurance: The Employer Pay Related Social Insurance (PRSI) threshold rises from €552 to €600 per week for 2027.

• Gift and inheritance tax: From 7 October 2026, the capital acquisitions tax (CAT) Group A threshold rises from €400,000 to €420,000, Group B from €40,000 to €44,000 and Group C from €20,000 to €22,000.

• R&D tax credit: The limit on subcontracting to third parties and third-level institutions rises to the greater of 20 per cent or €200,000 (previously 15 per cent or €100,000), and the first-year payment threshold rises from €87,500 to €105,000. Companies will also benefit from a new 5 per cent uplift on qualifying R&D wage costs.

• IP and start-up reliefs: The Knowledge Development Box (Ireland’s intellectual property box) has been extended to 1 January 2032, and existing claimant companies will have a limited option to opt out of the regime for all of their qualifying assets. The corporation tax relief for start-up companies has also been extended to 31 December 2030.

• Withholding tax: Professional Services Withholding Tax will move from a flat 20 per cent rate to personalised deduction rates, subject to a Commencement Order.

• VAT: The cap on the VAT Compensation Scheme for Charities rises from €10 million to €15 million.

What next?

The Finance Bill will set out the detailed legislation, including the rules for the Derelict Property Tax, the Retail Investment Account and Irish ETFs.

Conclusion

Budget 2027 offers welcome rate cuts for funds and investors and an important new savings product. However, it stops short of the deeper reform of the funds regime that the industry has long sought.

We will keep you updated as the Finance Bill progresses. In the meantime, if you have any questions about this briefing, please contact your usual Dillon Eustace Tax team contact.

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Dillon Eustace would like to acknowledge Sinead O’Connell for her contribution to this article.