The Irish R&D tax credit has just received a major vote of confidence. In January 2026, the Tánaiste published a comprehensive review confirming Ireland's commitment to innovation and the results should matter to any business doing R&D in Ireland.
The numbers tell an impressive story. In 2004, 73 companies claimed €70 million in R&D tax credits. By 2023, that had grown to 1,804 companies claiming €1.4 billion. Innovation in Ireland is seemingly on the rise, with companies making more and more claims for their R&D work.
How does the R&D tax credit work?
Ireland offers a 30% tax credit on qualifying R&D expenditure, increasing to 35% from 2026. Your R&D must involve systematic investigation seeking scientific or technological advancement. Crucially, you must be solving technical uncertainties, not just doing routine development work.
You can find more information on whether your project meets Revenue’s definition of R&D here: Understanding Revenue's Definition of R&D for Tax Credits
The credit is paid in three instalments:
- 50% in year one
- 30% in year two
- 20% in year three
This structure gives you predictable cash flow for your multi-year R&D programmes. Unlike tax deductions that only benefit profitable companies, you can choose if you want to receive the R&D tax credit in cash, making it valuable whether you're profit-making or not.
Who's claiming the R&D tax credit in Ireland?
The 2025 review revealed interesting patterns in who's using the credit and how.
By company size:
- 1,579 SMEs claimed €290 million (89% of claimants, 23.5% of the cost)
- 225 large companies claimed €1.1 billion (11% of claimants, 76.5% of the cost)
While the increased number of claims is encouraging, there is a sharp disparity across SMEs and large companies between the number of claimants and the amount they claim. Ireland is an attractive spot for large internationals, especially those with large R&D operations, however the incentive could do more to get SMEs spending money on Irish innovation.
However, after a decade-long plateau in claimant numbers, 2023 saw a growth across all company sizes: 74 additional micro companies, 58 small companies, 18 medium companies, and 23 large companies. It’s encouraging to see that this growth has been across all company sizes; it seems everyone is benefitting from Revenue’s recent improvements to the R&D tax scheme.
By sector:
- Manufacturing leads at €937 million
- Information & Communication showing strong growth
- Professional, Scientific & Technical expanding consistently
These sectors commonly see innovative R&D projects globally. Ireland continues to prioritise its manufacturing sector; it’s currently one of the top five employment sectors in Ireland.
R&D tax credit claimants now employ 253,000 people in Ireland, building an innovation-driven economy.
Foreign investment and R&D in Ireland
Here's what makes Ireland's R&D tax credit strategically vital: 84% of Ireland's R&D expenditure is conducted by foreign-owned companies. These companies account for 44% of total corporation tax paid in Ireland, but 96% of corporation tax liability from R&D claimants coming from foreign-owned businesses.
This isn't dependence; it's leverage. Ireland has built a competitive advantage that attracts high-value R&D activity, which in turn creates skilled jobs, knowledge transfer, and spillover benefits to domestic companies.
The review found that Ireland ranks among the most attractive OECD countries for R&D tax incentives, with the lowest effective average tax rates alongside Poland and Lithuania. In an era of increasing protectionism and potential tariffs, maintaining this competitive edge matters more than ever.
Recent reforms that changed the game
Budget 2026 announced new changes to the R&D tax credit regime, largely improving the scheme for Irish companies, especially SMEs.
Most importantly, the credit rate increased from 25% to 30% in Finance Act 2023, with a further rise to 35% confirmed for 2026. As the Tánaiste emphasised, this makes Ireland's offering "among the most competitive globally." Though we don’t have details on the exact implementation dates yet, a 35% credit rate will offer innovative Irish companies even more incentive to invest in R&D.
The first-year payment threshold has been progressively increased from €25,000 in 2022 to €87,500 in the most recent Budget. Claims up to this threshold are paid in full in year one, which is a huge boost to smaller claimants who can now get their full entitlement straight away.
Early signs these reforms are working
The 2023 data provides the first clear indication that recent reforms are having the intended effect.
More companies engaging: 173 additional claimants in 2023 versus 2022 represents the first meaningful increase in participation after a decade of plateau. Crucially, growth occurred across all company sizes, suggesting the reforms are working as intended.
Manufacturing sector strength: Manufacturing remains the largest beneficiary at €937 million, with employment in manufacturing R&D claimants increasing steadily from 2020 to 2023. This aligns with Ireland's strategy to retain high-value production.
Cash flow improvements: More companies are receiving cash refunds versus using the credit to offset tax. This is critical for startups and companies in growth phase, supporting multi-year R&D programmes with predictable financing.
Large multinationals now have certainty and competitiveness for locating R&D in Ireland. For SMEs, improved cash flow through enhanced first-year payments means you can access funding when you need it most.
Planning for 2026 and beyond
The review acknowledges increasing protectionism, trade barriers, and international competition enhancing their R&D tax schemes. Ireland needs to maintain its competitive edge precisely because the global environment is becoming more challenging.
The key takeaways from the 2025 review are:
- Ireland's R&D tax credit has evolved from a niche incentive in 2004 to a cornerstone of competitiveness strategy worth €1.4 billion in 2023
- Recent reforms show government commitment to both retaining foreign direct investment and supporting indigenous innovation
- Early 2023 data suggests reforms are working: more companies engaging across all sizes after a decade-long plateau
- International comparisons confirm Ireland's top-tier positioning for R&D tax incentives
- The 35% rate from 2026 strengthens Ireland's competitive position further
Whether you're already claiming or considering your first R&D tax credit claim, 2026 brings enhanced support. The increase to 35% represents a significant additional benefit for qualifying R&D expenditure.
At Myriad, we help businesses across Ireland maximise their R&D tax credit claims while maintaining full compliance. If you'd like us to review your R&D activities or discuss how these changes affect your business, get in touch.
