Finance (No.2) Bill 2026 – Impact for Financial Services

Reduction of tax rate for life assurance products and investment funds 

The Bill proposes a reduction in the rate of taxation (from 38% to 35%) on Irish non-corporate investors investing in Irish and foreign life assurance products, including investment undertaking tax and life assurance exit tax and investors in Irish and equivalent offshore funds in other European Union Member States, European Economic Area States and Organisation for Economic Co-operation and Development (OECD) countries with which Ireland has double taxation agreements from 1 January 2027. However, the taxation of relevant investors is not fundamentally altered.

While the reduction is welcome, the reduced rate remains above the general capital gains tax rate of 33% (reduced to 31% under this Bill). Further, the Minister’s stated in the 2027 Budget speech that it is the intention of the Government to continue working on the wider regime, including the rate of taxation, deemed disposal and the administrative burden facing investors to make further progress on removing barriers to investment.

Taxation of Irish investors holding units through a recognised clearing system

A new standalone tax regime for Irish-resident investors in Irish investment funds where the units are held through a recognised clearing system (such as securities traded through an exchange) was introduced in the Bill.

The purpose of this tax regime is to simplify and consolidate the tax treatment applying to these investments. The investment undertaking does not deduct Investment Undertaking Tax (IUT) for Irish-resident investors where its units are held through a recognised clearing system. Instead, the Irish investor must self-assess and pay the tax due on their investment.

Previously, individuals had to apply the rules for equivalent offshore funds when calculating their liability. Going forward, those offshore fund rules will no longer apply to these investments. The tax treatment will instead be contained directly in the new section.

Investment Accounts

The Bill introduces the Individual Investment Accounts (IIA) in Ireland. The IIA will also sit alongside the Government’s National Financial Literacy Strategy, which is intended to support individuals in developing the knowledge and confidence required to make informed saving and investment decisions. The regime will be available from 1 July 2027.

As outlined in the Bill, the IIA will have the following tax attributes:

Qualifying Account Providers

• Only qualifying account providers can offer IIAs. Permitted account providers include entities that hold certain regulatory authorisations with the Central Bank of Ireland (or EEA regulator) e.g. certain Investment firms, Banks and Credit Institutions, Insurance Undertakings and UCITS management companies.
• The providers must register with Revenue in advance. The Revenue Commissioners (Revenue) will establish and maintain a register of qualifying account providers, which will be published on the Revenue website.
• The level of fees charged on the IIA and qualifying will impact on the attractiveness of the IIA. During the Budget speech, the Minister indicated that the expected wide choice of service providers will foster competition, thus helping to reduce fees.

Qualifying Investors

• The account will be available to Irish-resident individuals aged 18 years and over who hold a Personal Public Service Number (PPSN). Where an investor becomes non-resident, no further contributions may generally be made to the account and transfers between providers are restricted during the period of non-residence. Existing investments may remain within the account, and contributions may recommence once Irish tax residence is re-established.
• The IIA will be subject to an annual contribution limit of €12,000, with no minimum contribution requirement. The legislation also contains anti-avoidance measures designed to enforce the annual contribution limit. Where contributions exceed €12,000 in a year, a separate 1% Investment Account Tax applies to the excess amount.

Tax regime for IIA

• The existing taxation regimes that apply to retail investment products, including the deemed disposal regime, will not apply to qualifying investments held within an IIA. Income, profits and gains arising from eligible investments held within an IIA will be exempt from income tax, capital gains tax and exit tax.
• Instead, investors will be subject to a new Investment Account Tax equal to 1% per annum of the average annual account value in excess of €50,000. The value of the account will be calculated daily, with the average of the daily values used for the purpose of calculating the tax due, if any. This will be the final liability in respect of the account (i.e. income, profits or gains arising will be exempt from tax and will not be reckoned in computing total income for tax purposes).
• Investors will be able to hold a range of qualifying investments including shares, bonds, exchange traded funds (ETFs) and other investment funds through banks, investment firms and insurers. The preferential tax treatment applies only to qualifying investments. Where non-qualifying assets are held within an account, the associated income and gains will not benefit from the IIA exemption and will be taxed under the normal tax rules.
• The Bill also provides for several technical amendments to existing legislation, including to Dividend Withholding Tax and USC, to ensure that the IIA operates as intended.
• No measures were announced to facilitate a tax neutral transfer of existing investments into the new Investment Account.

Administration of the IIA

• Account providers will be responsible for the administration of the account, including the calculation, reporting and payment of any tax due, removing the requirement for investors to engage directly with Revenue in relation to the operation of the account.
• The account provider will calculate the investment account tax (IAT) each year, using 31 December as the annual reporting date. By 31 March of the following year, the account provider must notify Revenue of the IAT due and provide the required supporting information. Revenue would then issue a summary statement showing the IAT payable by the 14 April in the following year.
• It is expected that the account provider will deduct the IAT directly from the individual’s investment account. However, tax may be recovered from the individual where appropriate IAT is not remitted to Revenue by the account provider.

The new regime is likely to create opportunities for Ireland’s pillar banks but also a range of other financial services providers, such as fund service providers, insurance providers, and other fintech providers to develop and offer qualifying investment products tailored to the IIA framework. The combination of the annual contribution cap, the €50,000 tax-free threshold, and the simplified tax treatment may encourage greater investments and increase demand of savings products, potentially supporting greater customer engagement and long-term asset growth across the financial services sector.

The Bill provides for several changes to Ireland’s preliminary corporation tax regime aimed at reducing uncertainty for taxpayers and providing greater flexibility in meeting payment preliminary tax obligations. These changes will come into effect for accounting periods commencing on or after 1 January 2027.

The proposed changes include:

Increase in the threshold for Small Companies

An increase in the Small company threshold from €200,000 to €350,000. This threshold is determined by reference to the corporation tax liability of the preceding accounting period and, where applicable, allows companies to avail of less onerous preliminary tax payment requirements.

Flexibility in preliminary tax payments

An extension of the current top-up tax mechanism, whereby preliminary tax requirements will be regarded as satisfied where at least 80% of the current year corporation tax liability has been paid by the final preliminary tax instalment date, provided that a balancing payment is made within four months of the end of the accounting period to bring the total liability paid to 100%.

Interest calculation for Large Companies

The removal of the current 45% deeming provision for large companies paying preliminary tax in two instalments. Under the proposed amendment, an underpayment of the second instalment will no longer result in a deemed underpayment of the first instalment, where the first instalment was at least equal to 50% of the prior year liability.

These measures address practical concerns raised by the business community regarding variable income like performance fees for asset managers and investment managers. The proposed changes will also reduce the risk of inadvertent non-compliance when estimating corporation tax liabilities before the end of an accounting period.

Interest deductibility

The Bill includes the first phase of a wider programme to modernise and simplify Ireland’s corporation tax rules for interest deductions. It makes a number of targeted amendments to the section 247 regime, which provides relief for interest on borrowings used to acquire shares in, or lend to, certain companies.

The changes clarify the use of loan proceeds and remove the existing common-director condition between investor and investee companies. They also introduce more flexible rules where capital is recovered from an investee or connected company. Broadly, a recovery of capital should not reduce interest relief where the amount is reinvested in a qualifying investment within six months or used to repay a qualifying section 247 loan. New allocation rules will apply where a recovery relates to more than one loan, while the total amount treated as repaid will be capped at the capital recovered.

The Bill also refines the connected-party rules. In particular, it provides targeted exceptions for certain intermediary financing companies and for qualifying connected-party asset acquisitions in certain circumstances. Related amendments coordinate the section 247 rules with Ireland’s transfer pricing provisions.

The majority of these changes apply for accounting periods commencing on or after 1 January 2027. The new connected-party asset-acquisition exception applies to acquisitions made on or after 1 January 2024.

The changes are welcome from a financial services perspective and should provide greater flexibility for groups using acquisition debt, intra-group lending and debt-funded equity structures. In particular, the revised recovery of capital rules may help preserve interest relief on certain reorganisations, refinancings and returns of capital. However, the changes are targeted rather than a comprehensive simplification of the interest deductibility rules, and the detailed conditions applying to connected-party acquisitions and intermediary financing structures will require careful consideration.

As noted above, we expect further updates to the tax treatment of interest generally in due course as part of the programme to modernise the rules. EY will continue to input into the wider consultation on Ireland’s rules around interest.

Interest limitation rule elections

The Bill extends the time available to make certain elections under Ireland’s interest limitation rules. At present, elections to form or join an interest group, withdraw from an interest group, or apply the group ratio or equity ratio rules generally must be made by the corporation tax return filing date for the relevant accounting period.

For accounting periods commencing on or after 1 January 2027, these elections may generally be made no later than two years after the end of the relevant accounting period. Where an interest group election is made after the normal filing deadline, the reporting company’s interest-group return will be due by the later of the normal filing date and the date on which the election is made.

The extended election window is a welcome development for financial services groups with complex or cross-border funding arrangements. It will allow additional time to assess the benefits of interest grouping and the group ratio or equity ratio once the relevant group information is available, reducing the risk that a potentially beneficial election is not made because the relevant analysis could not be completed in advance of the tax return filing deadline.

There are a number of updates to Ireland’s Pillar Two legislation contained in the Bill. The amendments can be broadly split into three categories, firstly those enacting the OECD’s January 2026 Side-by-Side Package, secondly amendments to reflect updated OECD Administrative Guidance in May and September 2026, and lastly some updates to Pillar Two administrative and penalty provisions. The most substantial change is the introduction of the Side-by-Side Package.

Side-by-Side Package

In line with the OECD’s January 2026 Side-by-Side Package the Bill includes:

• The introduction of the new permanent Side-by-Side (SbS) Safe Harbour. Upon election no IIR or UTPR top-up tax arises on undertaxed profits where the UPE is located in a jurisdiction with a qualified SbS regime. The OECD will maintain a record of all jurisdictions with a qualified SbS regime which currently only includes the United States.
• Implementation of the new permanent Ultimate Parent Entity (UPE) Safe Harbour which effectively replaces the Transitional UTPR Safe Harbour which expired at the end of 2025. MNE groups may elect to apply the safe harbour, eliminating UTPR top-up tax on undertaxed profits in the UPE jurisdiction where that jurisdiction has a qualifying UPE regime. The OECD has yet to  publish a central record of jurisdictions with a qualified UPE regime in respect of a fiscal year.
• The introduction of the permanent Simplified ETR Safe Harbour which aims to reduce the administrative burden in low risk jurisdictions. Under the safe harbour, no Pillar Two top up tax arises where a tested jurisdiction has a simplified ETR (simplified taxes/simplified income) of at least 15% or an overall simplified loss. This safe harbour applies in respect of a fiscal year or an accounting period commencing on or after 31 December 2026 and where certain conditions are met on or after 31 December 2025.
• Extension of the Transitional CbCR Safe Harbour by one year meaning it extends to any accounting period beginning on or before 31 December 2027 but shall not include a fiscal year that ends after 30 June 2029 which will allow sufficient time for the implementation of the permanent simplified ETR Safe Harbour.
• Introduction of the Substance Based Tax Incentive (SBTI) Safe Harbour which will enable certain qualified tax incentives (QTIs) to be treated as an additional covered tax. QTIs are generally tax incentives attributable to substance based activity within a jurisdiction.

Impact on the Financial Services Sector

Many US financial services groups have Irish entities with foreign subsidiaries and/or foreign (mainly EU) branches. In such cases, the Irish intermediate parent has had to apply Irish IIR top-up tax rules to subsidiaries/branches in jurisdictions where (A) a Pillar Two domestic top-up tax has not been implemented and (B) there is no intermediate parent, above the Irish company, in a Pillar Two IIR country. As well as the elimination of a UTPR liability in US MNE groups, the SBS agreement will mean no IIR applying in this situation for accounting periods starting 1 January 2026 or later.

The Simplified ETR Safe Harbour is potentially not so simple with a number of basic industry, conditional and elective adjustments to determine simplified income and also numerous mandatory and elective adjustments to determine simplified taxes. Industry adjustments for insurers will ensure that policyholder taxes and policyholder investment returns do not artificially reduce or increase the insurer’s Pillar Two income. For banks, returns on Additional Tier 1 (AT1) capital will be treated consistently with their economic effect i.e. distributions made in respect of AT1 capital are deducted as expenses, while distributions received in respect of AT1 capital are included as income.

Separately the Simplified ETR Safe Harbour allows for a permanent establishment simplification election to be made which will enable the simplified income/loss and simplified taxes of a branch to be attributed to the head office for the purposes of Simplified ETR Safe Harbour calculation. This may be of benefit in Irish HO/branch structures.

The Bill provides the legislative framework for Ireland’s phased introduction of mandatory structured electronic invoicing (eInvoicing) and digital VAT reporting. financial services businesses should act now to determine which entities and transactions are in scope, prepare to receive structured eInvoices and align internal and outsourced operating models.

The implementation timeline

Phase 1—1 November 2028: Businesses managed by Revenue’s Large Corporates Division that fall within scope must issue structured eInvoices for relevant domestic transactions and report prescribed transaction data to Revenue. From the same date, all Irish businesses must be able to receive structured eInvoices.

Phase 2—1 November 2029: The issuing and reporting requirements extend to VAT-registered businesses engaged in relevant cross-border European Union (EU) business-to-business (B2B) transactions.

The new framework will require:

• Mandatory structured eInvoicing for relevant domestic transactions
• Electronic reporting of prescribed transaction-level data to Revenue
• Customer identification, structured invoice retention, business controls and reliable audit trails
• Specific rules for self-billing, credit and debit notes, and certain domestic reverse-charge transactions

The Bill gives legislative effect to the implementation dates previously announced by Revenue. Businesses should plan on the basis that these deadlines will apply.

This is an enterprise-wide change affecting tax, finance, procurement, technology, data governance and third-party operating models—not VAT compliance alone.

Why this matters for financial services

• Be ready to receive eInvoices. VAT exemption does not remove the operational impact. All FS businesses must be able to receive structured eInvoices from 1 November 2028.
• Confirm whether Phase 1 applies. Each entity should assess whether it is managed by Revenue’s Large Corporates Division
• Identify the invoices in scope. Map taxable and exempt supplies and determine when a structured VAT invoice is required. Predominantly VAT-exempt businesses may issue fewer VAT invoices, but they will still need a robust classification process.
• Assess Phase 2 exposure. Taxable services received from EU suppliers may bring an entity within the Phase 2 issuing and reporting requirements, even where its core activity is VAT exempt. Non-EU purchases should not, by themselves, trigger Phase 2 issuing and reporting requirements.
• Review VAT group arrangements. Map VAT registrations, group members and intra-group billing flows. As further detail on the treatment of VAT groups is still awaited, implementation plans should allow for refinement.
• Take control of outsourced processes. Third parties may transmit transaction data, but the accountable person retains responsibility under the proposed framework. Contracts and controls with administrators, managers and other providers should address ownership, data quality, reporting deadlines, corrections and record retention.

What remains to be confirmed

The Bill establishes the framework, but regulations, Revenue guidance and technical specifications will determine key operational details. These include reportable data fields, reporting and correction processes, the transmission network, the treatment of mixed taxable and exempt supplies, VAT group rules and any sector-specific simplifications. The scope described above reflects the Bill as initiated and Revenue’s published implementation timetable.

eInvoicing is not simply a VAT project. financial services businesses should mobilise tax, finance, procurement, technology and operational teams now, while maintaining flexibility as the detailed rules develop.

Payment Services Exemption

The Bill amends the wording of the Irish VAT exemption for payment services, replacing the existing reference to “operating” a current, deposit or savings accounts and “negotiating or dealing in” payments and transfers with “transactions concerning” those activities. The amendment appears to be technical in nature as Revenue has confirmed in the Explanatory Memorandum accompanying the Bill that it is intended to align the domestic legislation with the EU VAT Directive and that there will be no change in practice, as it already applies the rules set out in the Directive.

Banks, payment service providers and fintech businesses in particular will need to take note of the change. More broadly however, it serves as a useful reminder that the scope of Irish VAT exemptions must be considered in the context of the EU VAT Directive and the relevant jurisprudence of the Court of Justice of the European Union.

Other Indirect Tax developments

Although not part of the Bill, financial services businesses should also note the forthcoming changes to Ireland’s VAT grouping rules.

From 1 January 2027, all Irish VAT groups will be regarded as comprising only the Irish establishments of their members. As a result, certain cross-border transactions between an Irish VAT group and an overseas head office or branch may now fall within the scope of VAT. With the change now less than 50 working days away, affected businesses should be assessing the potential impact on their existing VAT positions, compliance processes, and operating models.

Financial services clients including, insurance companies, asset managers and other organisations with restricted VAT recovery are likely to face the greatest impact from the Irish VAT grouping changes.

The ERR regime requires employers to submit real-time reports to Revenue in respect of certain benefits, allowances, and travel and subsistence payments provided to its employees. These mandatory reporting obligations have been administratively demanding, particularly for small and medium-sized businesses seeking to comply with the requirements.

To reduce administrative burden on employers, the Bill has revised the ERR reporting deadline to provide taxpayers with greater flexibility. Taxpayers may continue to report relevant information on or before the date a qualifying tax-free payment/ benefit is provided to an employee or elect to submit this information by the 14th day of the month following the month in which the reportable benefit is provided. This optional reporting approach will apply from 1 January 2027.

The Bill reduces the standard rate of CGT from 33% to 31% in respect of disposals made on or after 7 October 2026. However, the rate of CGT applying to disposals of development land remains unchanged at 33%.

While the two-percentage point reduction is relatively modest, the measure represents the first reduction in the standard CGT rate since 2012 and is intended to support investment, entrepreneurship and capital formation within the Irish economy. The CGT rate reduction represents a positive step towards enhancing the attractiveness of Ireland’s capital tax regime.

The Bill amends the definition of quoted preference shares following the delisting of the sole quoted preference shares from the Irish stock exchange. Currently, these definitions of ‘preference shares’ require a comparison of the rights carried by shares in respect of dividends and capital with those of fixed-dividend shares quoted on a stock exchange in Ireland. With effect from 1 January 2027, the definition will instead require a comparison with fixed-dividend shares admitted to trading on a regulated market in an EEA state.

The definition of quoted preference shares in Irish tax law is important as certain dividends received on such shares by Irish companies from other Irish companies can be exempted from corporation tax.

Health Insurance Levy

The Bill repeals the health insurance stamp duty changes introduced by Finance Act 2025 and replaces them with broadly similar measures, with some minor amendments. Under the Bill, the levy will be determined by reference to the insured person’s age on the date the contract is entered into or renewed, rather than on the first day of the accounting period in which the contract is entered into or renewed. The Bill also introduces a repayment mechanism where cover ceases within 12 months of commencement or renewal, allowing insurers to claim a pro-rata refund of stamp duty. These amendments will come into operation on 1 April 2027.

Bank Levy

The Bill confirms the extension of the Bank Levy for a further year as proposed in the Budget 2027, with a target yield of €200 million. The levy will continue to apply by reference to deposit levels held by the four liable financial institutions (i.e., AIB, Bank of Ireland, EBS and PTSB), using deposits at the end of 2024 as the reference point.

Customer Tax Operations and Reporting Services

The Bill corrects minor drafting errors in the implement of the OECD Crypto-Asset Reporting Framework (CARF) and Council Directive (EU) 2023/2226 (DAC8), respectively.

The relevant provisions are intended to prevent duplication of Irish due diligence and reporting requirements where a Reporting Crypto-Asset Service Provider is subject to corresponding requirements in another jurisdiction.

As originally drafted, the provisions included Irish tax residence as a relevant condition while also separately requiring tax residence in the relevant overseas jurisdiction. The Bill fixes these drafting errors by removing Irish tax residence from the relevant conditions. For CARF, the correction also adds a regular place of business in Ireland to the relevant conditions.

For financial services businesses within the scope of CARF or DAC8, the amendments clarify that due diligence and reporting undertaken in a relevant overseas jurisdiction remove the need to duplicate those obligations in Ireland. The Bill does not change the underlying CARF or DAC8 due diligence or information reporting requirements.

The amendments are deemed to have come into operation on 1 January 2026.

Transfer Pricing

The Bill introduces a specific payment deadline for additional tax arising from an amended assessment giving effect to an advance pricing agreement (APA).

The amendment applies where a taxpayer has filed a return containing a full and true disclosure of all material facts necessary for the making of an assessment, and the assessment is subsequently amended to give effect to one or more APAs. In those circumstances, any additional tax arising from the amended assessment will be treated as due and payable not later than one month from the date on which the assessment is amended.

The amendment introduces a specific payment deadline for additional tax arising where an assessment is amended to give effect to an APA. It therefore provides greater certainty regarding the payment timing for additional tax arising from the implementation of a competent-authority APA. For the purpose of this amendment, an APA is an agreement between the Irish competent authority and the competent authority of another jurisdiction that determines the transfer pricing criteria for covered transactions or the attribution of income or costs to a permanent establishment.