Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 29, 2022

Ireland announces Budget 2023

  • The Irish Minister for Finance presented Budget 2023 on 27 September 2022.

  • This Alert summarizes some of the notable announcements of most relevance to international investors.

  • The Finance Bill which will contain more detailed information on the Budget announcements and other proposed tax changes is scheduled to be published on October 20.

Executive summary

On 27 September 2022, the Irish Minister for Finance, Paschal Donohoe, presented Budget 2023.

Due to a strong post-pandemic rebound in the economy, the Irish Government’s budgetary response to the global energy and cost of living crises was delivered from a position of relative strength.

The overall package of €11 billion is comprised of budgetary measures for 2023 worth €6.9 billion together with an additional €4.1 billion in one-off expenditures that is focused on providing support, not only to individuals and families, but also to businesses in dealing with rising energy prices.

Notably, no extra borrowing was required to fund the Government’s €11 billion budgetary package, with the significant incremental spending possible, Minister Donohoe said, due to the strength in tax revenues (which are approximately €10 billion ahead of the same period last year) which is reflective of the Irish economy’s robustness as it emerges from the COVID-19 pandemic. Minister Donohoe also noted a projected General Government surplus of €1 billion for 2022, together with a projected €6.2 billion surplus for 2023.

Minister Donohoe further noted that the Irish labor market has made a remarkable recovery over the past year, with record employment levels being registered and an unemployment rate falling to 4.3% as of August 2022.

Headline inflation is forecasted at 8.5% for 2022, and just over 7% for 2023.

A key challenge for Budget 2023 is balancing the need to help households and businesses combat rising costs without further fueling inflation. To do this, Minister Donohoe doubled the size of the tax package and increased public expenditure for 2023, while signaling that future budgets will aim to stay within the parameters of the medium-term budgetary strategy as set out in the previously released Summer Economic Statement.1

Minister Donohoe also confirmed that €2 billion this year, and €4 billion in 2023, will be directed into a National Reserve Fund, where the funds will be used to provide the Irish Exchequer with “additional firepower to respond to challenges over the coming years.”

Detailed discussion

Notable Budget 2023 announcements for international investors

In the sections that follow, we have summarized some of the notable announcements of most relevance to international investors starting with a statement from Minister Donohoe as part of his Budget 2023 speech:

In addition to our 12.5 per cent headline tax rate we will also ensure that we continue to play to our traditional strengths such as a forward-looking business environment and an educated and dynamic workforce.

Employment taxes

In a positive development insofar as Ireland’s competitive foreign direct investment offering is concerned, Minister Donohoe announced an extension to a number of existing personal tax reliefs to 31 December 2025, including:

  • Special Assignee Relief Programme (SARP), which offers income tax relief to executives and is a key pillar in attracting key talent to come to Ireland, with the minimum income threshold for an employee to qualify for SARP being increased from €75,000 to €100,000 (this higher qualifying threshold will not however apply to current claimants availing of the relief).

  • Key Employee Engagement Programme (KEEP), with modification to the scheme enabling qualification for scheme purposes of the buyback of KEEP shares by a company from a relevant employee, and an increase to the employee lifetime limit for KEEP shares from €3m to €6m.

  • Foreign Earnings Deduction (FED) which is a relief for executives who are working overseas in new markets was also extended to 2025.

Another significant development was the doubling of the Small Business Exemption from €500 to €1,000 where employers can provide up to two tax free vouchers to employees to the value of €1,000.

Temporary business energy support scheme

Minister Donohoe announced the introduction of a scheme to assist companies carrying on a trade in Ireland with their energy costs. It is proposed that the scheme will operate by comparing the average unit price for the relevant billing period in 2022 with the average unit price in the corresponding reference period in 2021. If the increase in average unit price is more than 50%, support will be calculated on the basis of 40% of the amount of the increase. A monthly cap of €10,000 per trade will apply and an overall cap (not yet announced) will separately apply. Businesses will be required to register for the scheme and to make claims within the required time limits.

Global tax reform

Minister Donohoe reiterated Ireland’s commitment to the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Agreement to address the tax challenges arising from digitalization and separately noted Ireland’s long-standing position that coordinated multilateral action is the best approach to ensuring that the international tax system keeps pace with the changes in how business today is conducted internationally.

While Ireland will continue to engage intensively at OECD and European Union level to follow through on the OECD Two-Pillar Agreement commitments, Irish legislation to introduce the Pillar Two minimum tax rules is not expected in this year’s Finance Act.

Territorial System of Taxation

EY welcomes the announcement by Minister Donohoe that serious consideration of options for a move towards a territorial corporation tax system is continuing in conjunction with work to develop the elements required to give effect to the Pillar Two minimum tax rules.

A public consultation seeking stakeholder views on a possible move to a Territorial System of Taxation was launched in December 2021 and EY has been actively engaged with Irish policy makers in this regard.2 The introduction of a territorial regime could be effective from 2024 in line with the proposed timeline for the Pillar Two minimum tax rules.

Innovation incentives

While no legislation to introduce the Pillar-Two minimum tax rules is anticipated in this year’s Finance Act, Minister Donohoe announced two notable amendments to existing incentives to achieve better alignment with the Pillar Two Model Rules.

Research & Development Tax Credit Regime

The Research & Development (R&D) tax credit is a key incentive for companies performing R&D in Ireland. A 25% refundable credit is available in addition to the general tax deduction for R&D expenditure. Earlier this year, the Irish Department of Finance conducted a public consultation on the R&D tax credit. As part of this consultation, EY recommended that a number of changes should be made to the existing R&D tax credit regime to ensure that that it is aligned and compliant with broader international tax reform efforts. EY welcomes Minister Donohoe’s announcement that Finance Act 2022 (to be enacted in December 2022) will introduce amendments to the payable element of the R&D tax credit scheme which will ensure the regime is regarded as a “qualifying refundable credit” for the purposes of the Pillar Two Model Rules. This change is also intended to protect the value of the regime in an international context. These changes reflect EY’s feedback to the public consultation.

Knowledge Development Box

The Knowledge Development Box (KDB) regime, which encourages companies to develop certain types of intellectual property in Ireland, has been extended for a further four years to 31 December 2026.

In recognition of the changes anticipated in the broader international tax environment, specifically under the OECD Pillar Two agreement, the effective rate under the KDB regime is to be increased from 6.25% to 10%. The KDB rate change will come into effect from a date to be set by a future commencement order to be determined by reference to the international progress made on the implementation of the Pillar Two and the Subject to Tax Rule. EY will continue to engage with Irish policy makers advocating potential improvements to the KDB regime aligned with Ireland’s stated commitment to ongoing competitiveness.

Further legislative detail regarding the proposed changes to the aforementioned business tax incentives will be included within the Finance Bill to be published on 20 October 2022.

Digital Gaming Sector

While first announced as part of last year’s Budget (Budget 2022), the European Commission has recently approved a tax credit scheme in Ireland to support the development of digital games that promote Irish or European culture. The new 32% tax credit for the digital gaming sector on eligible expenditure up to €25m per project will run until 31 December 2025.

Other notable Budget measures

A number of key tax measures and changes were announced in Budget 2023 including a widening of personal income tax bands, an increase in personal tax credits and the provision of substantial energy supports to individuals and businesses in Ireland. There are no changes to employer social security proposed in Budget 2023.

In addition, extensions and amendments to other housing and property-related tax measures were also announced. These measures will be key to stimulating increased residential market supply and maintaining Ireland’s position as a preferred location for international investment.

A separate EY Ireland Tax alert summarizing the Budget 2023 measures can be found here along with a link to EY’s Budget Briefing webcast recording.

Next steps

The Finance Bill which will contain more detailed information on the Budget announcements and other proposed tax changes is scheduled to be published on 20 October. A Tax Alert will be issued shortly after publication of the Bill.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin

Ernst & Young (Ireland), Financial Services, Dublin

Ernst & Young (Ireland), Cork

Ernst & Young (Ireland), Limerick

Ernst & Young (Ireland), Waterford

Ernst & Young (Ireland), Galway

Ernst & Young LLP (United States), Irish Tax Desk, New York

Ernst & Young LLP (United States), Irish Tax Desk, San Jose

Ernst & Young LLP (United States), FSO Irish Tax Desk, New York



  1. - Government publishes Summer Economic Statement 2022 (

  2. See link for EY’s response to the Public Consultation on a Territorial System of Taxation.


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more