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Budget 2025 has been unveiled, and with it come a few notable measures pertaining to the Irish business, SME and start-up landscapes.
Another year, another budget, as today (1 October) the Irish Government revealed the details of Budget 2025. In his first budget as Minister for Finance, Jack Chambers, TD, laid bare the financial plans for the Irish State for the next year.
As well as measures relating to individuals – such as amendments to the rent tax credit and USC – Chambers announced a number of supports and measures aimed at Ireland’s business ecosystem, from enhancing Ireland’s attractiveness for businesses to extending start-up supports.
Foreign dividends
One of the major announcements in terms of the business landscape is a participation exemption for foreign dividends, which will come into effect at the start of January. This exemption, according to Chambers, aims to “provide an alternative, much simplified mechanism for double tax relief for multinational businesses”.
It is hoped that this measure will continue to ensure Ireland’s attractiveness to foreign direct investment by providing flexibility and administrative simplicity to taxpayers when claiming double tax relief.
“The participation exemption for foreign sourced dividends and distributions is a welcome next step towards a full territorial regime in the Irish tax system,” said Daryl Hanberry, partner and head of tax and legal at Deloitte Ireland.
R&D tax credit
A consistently anticipated topic of budgets past and present has been the R&D tax credit. This incentive incentive is designed to encourage investment in R&D by companies in Ireland. Last year, this credit received a welcomed boost from 25pc to 30pc.
As part of Budget 2025, there will be an increase in the first-year payment threshold in the tax credit, rising from €50,000 to €75,000, in order to provide further cash-flow support to companies with smaller R&D projects or those that are engaging with the credit for the first time. This threshold is the amount up to which a claim can be paid in full in the first year, rather than being paid in instalments over three years.
This announcement has been welcomed by Sarah-Jane Larkin, director general of the Irish Venture Capital Association (IVCA). “This will be meaningful for early-stage knowledge-intensive companies engaged in R&D activities and will have a very positive impact on cash flow at a critical point.”
Start-up support
One major reveal of the afternoon was the announcement that the Employment Investment Incentive (EII), the Start-Up Relief for Entrepreneurs (SURE) and the Start-Up Capital Incentive (SCI) have all been extended for two years until the end of 2026.
The EII is a tax relief to encourage individuals to provide equity-based finance to trading companies, SURE is a tax relief available to those starting their own business that provides a refund of income tax, and SCI is a tax relief designed to assist start-up companies raise equity financing.
The amount that an investor can claim relief on under the EII is being doubled from €500,000 up to €1m. In addition, Chambers announced that the amount of relief available under SURE is being increased from €700,000 to €980,000.
There will also be an enhancement of the section 486C tax relief, which grants start-ups a corporate tax reduction for their first five years of trading. According to Chambers, a new method of qualification for this relief by reference to Class S PRSI (which is paid by those who are self-employed, sole traders, etc) will be introduced, extending the scope of the relief to “small owner-managed start-up companies”.
Scale-up boosts
As for scale-ups, there will be a new relief for expenses incurred in connection with a business’ first listing on an Irish or European stock exchange, which is capped at €1m. Also announced were plans to introduce a stamp duty exemption, which according to Chambers will “enable Irish SMEs to access equity via financial trading platforms designed to support their funding needs”. The stamp duty exemption is set to be introduced by the Department of Finance in the coming year, subject to State Aid considerations.
These scale-up measures have been welcomed by Brian Caulfield, chair of Scale Ireland, who added that the stamp duty exemption in particular “sends a strong message”.
In regard to angel investors, there will be an amendment to the Capital Gains Tax relief targeting investors in innovative start-ups, with the goal of providing for an increased lifetime limit on gains to which the relief applies from €3m to €10m. This relief was revealed in Budget 2024 and according to Chambers, will commence “shortly”.
“Angel investors are often the lifeblood of start-up or scaling businesses who may find it difficult to raise funding via traditional sources,” said Alison McHugh, head of private client services at EY Ireland. “The increase in the relief from €3m to €10m will further incentivise investors to invest in Irish indigenous business which are key to the growth of our economy.”
Enterprise investments
Along with supports for individual businesses, Minister for Public Expenditure and Reform of Ireland Paschal Donohoe, TD, announced an investment of more than €1bn in the Department of Enterprise, Trade and Employment’s Jobs and Enterprise Development, Innovation and Commercialisation and Regulation Programmes in 2025. This decision is described by Larkin as “a strong commitment to our enterprise sector”.
As well as this, Donohoe announced the provision of capital funding to enable Government and State agencies IDA Ireland and Enterprise Ireland to provide additional environmental aid to their clients, almost €7m in additional funding to the Department’s regulatory bodies and agencies.
‘An opportunity missed’
While reactions to the business side of Budget 2025 have been generally quite positive, there is still some disappointment. While the IVCA called it a “very positive budget for Irish businesses and individuals”, Larkin added that there was a lack of encouragement for institutional investors.
“While there was reference in Minister Chamber’s speech about future-proofing the Irish economy, we strongly believe one of the best ways to achieve this is to broaden the capital base of institutional investment available to our indigenous companies,” she said.
“Increasing pension thresholds, while not enacting measures to encourage those institutional investors managing our pension savings to invest in the jobs of tomorrow is an opportunity missed.”
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