Tax Update
As at 28 February 2026
"The team are highly client-centric and take the time to listen and analyse each client's specific situation, developing personalised tax strategies and solutions."
Tax: Chambers Europe 2025
Publication of the Research and Development Tax Credit and Innovation Compass
On 16 February 2026, the Department of Finance published its R&D Tax Credit and Innovation Compass (the “Compass”).
The Compass provides an overview of how the R&D tax credit currently operates and the various proposals to improve the R&D credit that have been made by external stakeholders. The document also outlines the future changes that will be considered including:
- The R&D tax credit will be reviewed during 2026 to assess alignment with qualified tax incentives pursuant to Pillar Two.
- The sub-contracting provisions (which allow certain costs of R&D outsourced to third parties to qualify for the relief) will be reviewed. Consultation on the treatment of sub-contracting under the R&D tax credit should continue during 2026 but may be targeted at interested parties such as industry groups who have a history of participating in consultations on the R&D tax credit.
- The definition of ‘qualifying expenditure’ will be examined – no timeline is included for that examination. In addition, further consideration will be given to the possibility of agreeing a fixed percentage of overhead costs that would qualify for the relief.
- There is no immediate plan to review the treatment of capital expenditure on R&D.
- It is not anticipated that further changes to the rate of the R&D tax credit will be made in the near future (it has been extended twice in the last two years: first to 30% and most recently in Finance Act 2025 to 35%).
- A general commitment is included for the Department of Finance and the Revenue Commissioners (“Revenue”) to work together to determine if legislative or administrative steps might be taken to simplify the R&D tax credit regime or provide greater assistance and clarity to taxpayers and claimants of the credit.
- The Department of Finance will consider options to encourage and reward innovation undertaken by companies carrying on R&D in Ireland.
- The Knowledge Development Box will be reviewed during 2026 and a public consultation will be launched.
It seems reasonable to expect some positive changes to the treatment of sub-contracting in the Finance Bill 2026. This could include an increase of existing thresholds for outsourced R&D (currently capped at €100,000 or 15% of the internal R&D cost, whichever is greater).
If you have specific feedback on the R&D tax credit regime, please speak to your usual Matheson contact and we can include that feedback in future submissions we make.
Revenue confirms ‘Large Corporates’ will be within Phase One of VAT modernisation from November 2028
On 10 February 2026, Revenue confirmed that companies who deal with Revenue’s Large Cases Division (“LCD”) and have an establishment in Ireland will be considered within scope for Phase One of Ireland’s VAT Modernisation programme. Taxpayers within LCD will be subject to the first phase of implementation for mandatory e-invoicing and real-time reporting for domestic transactions beginning on 1 November 2028.
This announcement follows the publication of Revenue’s October 2025 implementation document which detailed Ireland’s pathway to domestic mandatory e-invoicing and real-time reporting.
In our recent insight we discuss the key take-aways from this press release, highlight the actions to take now and what this means for businesses operating in Ireland.
OECD’s updated 2026 Manual on Effective Mutual Agreement Procedures
The OECD Manual on Effective Mutual Agreement Procedures (2026 Edition) (the "MEMAP") was published on 2 February 2026 and is intended to serve as a comprehensive, practical guide for navigating Mutual Agreement Procedures ("MAP"), without imposing binding rules or requirements. The MEMAP does not alter existing treaty rights or obligations, rather it complements existing authoritative sources and provides a framework against which taxpayers can benchmark how their MAP cases are being handled.
In our recent Matheson insight we outline some practical takeaways from the MEMAP and the key points for Irish taxpayers.
Matheson Response to Public Consultations – Interest and eWHT
Matheson response to public consultation on the taxation of interest
Matheson submitted a response to the Department of Finance public consultation on the taxation of interest in January. The public consultation document included a strawman proposal outlining the key elements of a revised regime for taxing interest in Ireland. One of the main proposals in the strawman was to replace the existing rules on interest deductibility with a new profit motive test.
In our response, we focussed on the need for Ireland to rely on levers other than rate to preserve the competitiveness of the Irish tax system. We recommended that the proposed strawman should not be adopted as it would result in uncertainty and undermine Ireland’s competitiveness. Instead, we recommended that Ireland introduce a single commercial purpose test for determining whether interest should be deductible which we believe would be a material improvement to the existing rules. Under the original timetable, draft legislation indicating the direction of travel was due to be issued for public consultation in mid-April 2026 so that an updated version could be included in this year’s Finance Bill.
You can read our full submission here.
Matheson response to proposal to introduce new eWHT
Matheson also responded to the public consultation issued jointly by the Department of Finance and Revenue on the introduction of a new withholding tax regime for payments made to gig-economy workers and those letting property on a short-term basis (the “eWHT”). The proposed eWHT would apply to online platforms and require them to withhold tax on service payments made to Irish residents and to payments made for Irish short-terms lets on their platforms.
In that response, we highlighted: (i) the negative impact the proposal would have for entrepreneurs who sell their services through online platforms; and (ii) the unreasonable burden the proposal would impose on operators of online platforms in Ireland. We suggested that instead, Revenue should use the information collected through DAC7 to pre-populate the tax returns of Irish taxpayers, undertake an education campaign to inform those taxpayers of their Irish tax obligations and design simplified tax filing procedures for those taxpayers. We believe that approach would be a better response to the issues the eWHT is intended to address and would be better for the overall functioning of the Irish tax system.
You can read our full submission here.
Updates to EU List of Non-Cooperative Jurisdictions
On 17 February 2026, the European Council announced the updated EU list of non-cooperative jurisdictions. Turks and Caicos Islands and Vietnam have been added to the list, and Fiji, Samoa and Trinidad and Tobago have been removed as they now comply with all agreed international standards.
The new additions to the list should be considered for any transactions involving those jurisdictions. Transactions with related counterparties resident in jurisdictions included on the list can trigger DAC6 reporting obligations and the Irish outbound payment rules (which can result in Irish withholding tax applying to payments made to those counterparties). Inclusion on the list also impacts how Ireland’s CFC rules apply to subsidiaries located in listed jurisdictions.
The EU list of non-cooperative jurisdictions for tax purposes is a list of third country jurisdictions that fail to meet agreed standards of tax governance. Annex I includes jurisdictions that are considered non-cooperative (the blacklist) and Annex II includes jurisdictions that have made formal commitments to address deficiencies but are not yet compliant. While Vietnam was removed from the Annex II list last October it has been added to the blacklist now.
The next scheduled update is October 2026.
Update on EU/US trade deal
The European Parliament announced on 23 February 2026 that it would postpone a vote to ratify the EU / US trade agreement. Ratification by the European Parliament is the last step in an EU process that has already taken over six months. The decision to postpone ratification was made in response to the replacement tariffs announced by President Trump following the US Supreme Court decision which invalidated the IEEPA tariffs. On the same day, a spokesperson for the European Commission noted that they were seeking clarity from the US on precisely what their position is. The next few weeks and months will likely see a return to a more unpredictable trade environment for businesses operating on both sides of the Atlantic.
Our Customs and Trade law team are monitoring developments and we will keep you informed as matters progress.
Share Scheme Reporting – 2026 filing date
The deadline for share scheme reporting is fast-approaching. Irish tax law requires that certain details be filed in relation to share options in respect of the grant, exercise, release and / or cancellation of share / stock options granted by both Irish and non-Irish companies during a particular year to Irish tax resident directors / employees or directors / employees who exercise their duties in Ireland.
Irish legislation also provides for the mandatory electronic reporting of certain other forms of share-based remuneration. This includes restricted stock units (RSUs), restricted shares, convertible shares, forfeitable shares, discounted shares, phantom shares, stock appreciation rights, growth / flowering / hurdle shares and any other award which is a cash-equivalent of shares.
Matheson's tax team have prepared an overview of the share scheme reporting requirements, ahead of the reporting deadline of 31 March 2026, which is accessible here.
If you have any queries on any aspect of the above, or if we can assist you with your filings, please speak with your usual Matheson contact.
InDisputes - Hegarty v Revenue: High Court Overturns TAC on General Anti-Avoidance Rule
The High Court has delivered a significant judgment in the area of Irish tax anti-avoidance law, finding that the Tax Appeals Commission erred in its application of section 811 of the Taxes Consolidation Act 1997, the general anti-avoidance rule.
In our latest InDisputes article, we provide an overview of the judgment and its key take-aways for clients.
