Abolishing the first-time buyer’s tax relief
The start-up allowance is an income tax scheme under which an entrepreneur who has been in business for less than five years (a start-up) is, subject to certain conditions, entitled to an additional tax deduction of up to €2,123 for a maximum of three years. The start-up allowance will be reduced to €10 with effect from 1 January 2027 and abolished entirely with effect from 1 January 2028. In line with this, the discretionary depreciation scheme for start-ups will also be abolished in 2028.
Start-up allowance in the event of incapacity for work
It is also proposed to abolish the start-up allowance for incapacity for work with effect from 1 January 2029. The scheme is intended for entrepreneurs who do not meet the 1,225-hour criterion but do meet the reduced 800-hour criterion. At present, the deduction is capped at €12,000 in the first year, €8,000 in the second year and €4,000 in the third year.
Scale back and abolish the tax relief for participation in industrial action and strikes
It is expected that, from 2027, the partner’s allowance and the business cessation allowance will first be scaled back by 75% and then abolished from 2030. The partner’s tax relief is a scheme whereby self-employed individuals subject to income tax, whose partner works in the business on an unpaid basis, pay less tax on their profits. The amount of the partner’s tax relief is linked to the number of hours worked by the partner. The business cessation allowance ensures that income tax entrepreneurs who cease trading do not have to pay tax on part of the profit realised in the process. The business cessation allowance currently stands at €3,630. This will be reduced to €908 in 2027.
Increase in the EIA deduction rate
The deduction rate for the Energy Investment Allowance (EIA) will be increased from 40% to 45.5% with effect from 1 January 2027. This will make it financially more attractive for businesses to invest in energy-saving measures or renewable energy. In this way, the government is seeking to promote sustainability and reduce dependence on energy from abroad.
Abolishing the forestry exemption
The forestry exemption is a scheme that exempts profits from forestry operations from income tax and corporation tax. The Government proposes to abolish the forestry exemption with effect from 1 January 2029, without any transitional provisions.
The aim of the forestry exemption is to promote the conservation and creation of forests by forestry enterprises. According to recent research, the forestry exemption is neither effective nor efficient. Forestry businesses are unprofitable or only marginally profitable. Consequently, the use of the exemption by forestry businesses is limited. It is primarily non-forestry businesses with limited forest holdings that make use of the scheme. Abolishing it will simplify the tax system. Part of the revenue generated by abolishing the forestry exemption will be allocated to nature conservation policy via the budget of the Ministry of Agriculture, Nature and Food Quality.
SME flat-rate scheme for the innovation box
Corporate tax includes a flat-rate scheme designed to make the innovation box more accessible to small and medium-sized enterprises (SMEs). If this scheme is opted for, 25% of the profit is treated as the net amount of benefits arising from intangible assets and taxed within the innovation box. There is a maximum of €25,000 per year per taxpayer. As profit from an intangible asset does not usually arise in a single year, it has been decided to spread this profit over the year in which the intangible asset arises and the two subsequent years.
The Government proposes to extend this flat-rate scheme with effect from 1 January 2027 by raising the maximum amount to €100,000.