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      Housing and related infrastructure challenges are some of the key areas impacting Ireland’s competitiveness and continued growth. Budget 2026 tackled those challenges head-on, announcing a suite of wide-ranging tax measures targeted at housing, and large capital investment commitments.

      The Government have ambitious targets of 300,000 homes by 2030, so 50,000 to 60,000 homes a year, with industry sources indicating that 50% of these need to be apartments. With the complicated nature of apartment builds, they require a different capital and funding model, and current regulations, costs and timelines mean there are significant viability challenges with their development.

      So against that backdrop it was no surprise that Budget 2026 focused on a widespread package of housing measures, targeting apartments, as well as regeneration, retrofits and reforms, with an aim of increasing supply within the 2030 timeframe and reducing the viability gap that currently exists for apartments.

      Finance Bill 2025 contains the legislative provisions for many of the measures already announced in the Budget, as well as a number of other changes which are summarised below.

      Carmel Logan
      Carmel Logan

      Partner, Tax, Head of Real Estate

      KPMG in Ireland

      Reduced 9% VAT rate for supplies of apartments

      A Financial Resolution, passed on Budget night, introduced a 9% VAT rate for the supply of an apartment in an apartment block, as that term is defined in stamp duty legislation, with effect from 8 October 2025 until 31 December 2030.

      Following extensive consultations, the measures were updated with effect from 26 November 2025, to extend the 9% VAT rate to also include the sale of a site on which an apartment or apartments (in an apartment block, as defined) or an entire apartment block will be developed, as well as the development until completion of those apartments, such as under a forward funding arrangement.

      This is subject to meeting the definition of an “apartment block” in VAT law and the exclusion of any areas of the apartment block not used or to be used for residential purposes (the sale and development of properties not meeting these criteria would remain subject to the 13.5% VAT rate).

      We welcome this change and believe it will go some way to addressing the “viability gap” in apartment construction. We expect Revenue to publish further guidance on the precise circumstances in which the 9% VAT rate does and does not apply to help ensure certainty and consistency of approach in the market.

      Waiver of exemption on property lettings

      The Bill contains measures which, upon the date of passing of the Finance Act, will bring the VAT waiver of exemption (waiver) regime for property lettings to an end. This confirms the position already adopted in practice by Revenue since December 2024 that the cancellation of a waiver of exemption will no longer result in a payment of the excess of any VAT reclaimed over VAT paid in respect of the waiver.

      However, landlords who had been relying on the waiver provisions to apply VAT to lettings should review the VAT treatment as those lettings could become VAT exempt following the passing of the Finance Act with a consequent impact on their VAT recovery position. For further analysis, please refer to our VAT and Indirect Tax article on the Finance Bill.

      Enhanced corporation tax deduction for qualifying apartment construction costs

      An enhanced corporation tax deduction is being introduced for qualifying apartment construction costs. This new measure allows an additional deduction of 25% of eligible expenditure, up to a maximum additional deduction of €50,000 per apartment. This equates to a potential net benefit of up to €6,250 per apartment (€50,000 X 12.5% corporation tax rate).

      Eligible expenditure:

      • includes expenditure incurred by a property developer in connection with construction operations carried out in respect of the completed development up to the date a Completion Notice is lodged;
      • essentially limits the additional deduction to spend on actual construction costs. The definition specifically excludes any capital expenditure incurred, as well as “ineligible expenditure”, such as financing costs, taxes, duties, levies, costs associated with acquiring or disposing of the land or rights over the land, and any levies, fees, charges or contributions imposed in respect of the completed development (e.g. development contributions, planning application fees, etc.); and
      • is restricted where it is met by grant or State assistance, exceeds an arm’s length amount or is part of a scheme or arrangement for the avoidance of tax.

      In addition, where an enhanced deduction is claimed by reference to a debt incurred in respect of eligible expenditure, and this debt is subsequently released, a portion of the enhanced deduction is disallowed and treated as a trading (or post-cessation) receipt.

      Definition of an apartment


      An apartment for the purposes of this new enhanced deduction refers to a separate and self-contained dwelling in a qualifying apartment block that has exclusive access to its own sleeping, bathroom and kitchen facilities.

      In addition, there must be grouped or common access to the apartment (other than for ground floor units). As a result, this introduces a separate definition of apartment than that used in the stamp duty legislation and the new 9% VAT rate, and it seems many co-living developments and most duplexes may not qualify for the enhanced deduction. While we understand the intention is that student accommodation should qualify, this will be dependent on whether the particular scheme meets the definition. We are hopeful this will be clarified in forthcoming Revenue guidance.

      The enhanced deduction will be available for projects comprising of 10 or more apartments, for both new-build developments and for conversion projects where there has been a “material change” (i.e. while not originally constructed for use as a dwelling, or where originally constructed for use as a dwelling, was not suitable for use as a dwelling or was appropriated for other purposes, and becomes suitable for use as a dwelling).

      Who can claim it


      The enhanced deduction applies in the first instance where the property developer is the beneficial owner of the completed development on the date the Completion Notice is lodged. However, in this case the enhanced deduction only applies where the property developer’s trade consists wholly or mainly of the construction of buildings or structures with a view to their sale, and it does not apply to “excepted” trades.

      Given that many developers at any one time may hold landbanks, new-build projects, and possible conversion projects, developers wishing to claim the enhanced deduction will need to carefully consider their fact pattern.

      Based on the original drafting many schemes would not have been able to avail of the enhanced deduction due to the requirement that the property developer (as defined) was the beneficial owner. However, welcome changes were made at the Committee Stage which provide that the beneficial owner is entitled to complete a ‘relevant declaration’ allowing the apartment builder to claim the enhanced deduction.

      How to claim


      The relevant declaration must be in the form prescribed by Revenue, and signed by the beneficial owner. Where there are multiple beneficial owners, each beneficial owner must make a relevant declaration to the same apartment builder. Where a relevant declaration is made to more than one counterparty, then it will be deemed that no relevant declaration has been made.

      It will be important for all parties to appropriately consider the availability of the enhanced deduction as part of the contractual arrangements, and where necessary get agreement from the beneficial owner that the relevant declaration will be made.

      To avail of the enhanced deduction a Commencement Notice must be submitted between 8 October 2025 and 31 December 2030, and a claim must be made within 12 months of the end of the accounting period in which the Completion Notice was lodged.

      Expanded scope for Residential Development Stamp Duty Refund Scheme

      This scheme provides for a partial repayment of the stamp duty paid on the acquisition of land where the land is subsequently developed for residential purposes subject to a number of conditions. The scheme was due to close to new commencements at the end of 2025, but the Finance Bill extends the scheme to developments that commence, pursuant to a commencement notice, before 31 December 2030.

      The Finance Bill includes a number of additional proposed amendments to the scheme, including:

      • for large-scale residential developments, the time limits to avail of the relief are to be extended from 30 months to 36 months, for both the period from site acquisition to commencement, and from commencement to completion,
      • for multi-phase developments, a refund will be available on commencement of the first phase of development. Where such a claim is made, the time limit from commencement to completion should apply from the date of the last commencement notice, and
      • technical amendments to reflect changes due to the new Planning and Development Act 2024.

      Unfortunately, there have been no changes in respect of the other key qualifying conditions, the footprint and gross floor space tests. These tests can present significant challenges in claiming the refund in practice.

      New corporation tax exemption for Cost Rental Scheme units

      The Finance Bill introduces a corporation tax exemption in respect of rental profits or gains from homes that are designated by the minister for Housing, Local Government and Heritage as Cost Rental Scheme properties on or after 08 October 2025.

      The Bill also provides that any rental losses, relief for pre-letting and retrofitting expenses and industrial buildings allowances and capital allowances related to qualifying Cost Rental Scheme units are to be disregarded.

      Persons who are in receipt of rental income in respect of qualifying Cost Rental Scheme units will be obliged to file an annual corporation tax return. The return should disclose the number of qualifying Cost Rental Scheme units which are rented, the total rent receivable from the units and the profits attributable to those units. Where qualifying Cost Rental Scheme units are disposed of, the exemption does not apply to chargeable gains arising from such disposals.

      Where the minister revokes the Cost Rental designation of a unit, the minister is obliged to inform the Revenue Commissioners in writing.

      The exemption will no longer apply from the date of revocation (and any capital allowances which would otherwise be due shall be deemed to have been granted).

      Amendments to certain Residential Zoned Land Tax (RZLT) provisions

      RZLT is an annual 3% tax on the market value of land that is both serviced and zoned as suitable for residential development, subject to a number of exclusions. RZLT was originally introduced as part of Finance Act 2021, as part of a range of ‘Housing for All’ initiatives, specifically as a measure to activate land to increase housing supply.

      There have been a number of subsequent amendments and deferrals to the tax since its original introduction and the first RZLT returns were filed in 2025.

      The Finance Bill proposes a number of additional amendments to the RZLT legislation:

      • The Bill proposes to update the criteria for inclusion on the RZLT map to refer to specific provisions in the Planning and Development Act 2024. Certain land zoned in a development plan under the 2024 Planning & Development Act, where development would not conform with the order of priority or phasing for development indicated in the relevant development plan, urban area plan, priority area plan or coordinated area plan for an area within which the land is situated will not be included in the RZLT map. This applies where such order of priority or phasing is based on the timing of the provision of public infrastructure and facilities (such as public lighting, roads and footpaths, and water supply).
      • Measures are proposed to give landowners an opportunity from 1 February 2026 to 1 April 2026 to request a change to the zoning of lands included in the RZLT map for 2026 due to be published by 31 January 2026. The local authority will be obliged to acknowledge receipt of requests by 30 April 2026 and to notify the landowner of its decision by 30 June 2026. It is proposed that an RZLT exemption will apply where a request for a change to the zoning of the lands is submitted on or before 1 April 2026, and is acknowledged by the local authority provided that the land is not the subject of a current planning application which proposes, or an extant planning permission which allows residential development of the land in question.
      • It is proposed that a full exemption from RZLT will be introduced for sites subject to third-party appeals to An Coimisiún Pleanála or judicial reviews in relation to grants of planning permission. The exemption will apply for the period between the date planning permission was granted and the date the appeal or judicial review is resolved. There will no longer be a clawback of RZLT during this period where the appeal or judicial review is unsuccessful for the landowner.
      • For wholly or mainly commercial developments, it is proposed that the requirement to submit a notice to the Revenue Commissioners within 30 days of the commencement notice will be amended. The requirement to submit a notice to the Revenue Commissioners will be 30 days from either first becoming a relevant site or 30 days from the date of the commencement notice (if that is subsequent to becoming a relevant site).
      • There are a number of updates proposed to the RZLT law to provide for updated references and definitions in the Planning and Development Act 2024.
      • There are minor changes to RZLT provisions where the landowner dies.

      Unfortunately, there have been no changes to the provisions regarding sales or transfers of sites on which RZLT is currently being deferred where the transfer is to allow the development (for example, forward funding arrangements).

      Extension to income tax deduction for landlord retrofitting 

      The income tax relief for retrofitting rented residential properties has been extended for a further three years to 31 December 2028.

      The Finance Bill provides that, from 2026, the deduction can be claimed in the year in which the expenditure is incurred, and the number of eligible properties will increase from two to three.

      Expansion of the Living City Initiative

      The Living City Initiative (“LCI”) is a targeted urban regeneration tax relief scheme aimed at encouraging the refurbishment and reuse of older buildings in designated city and town centres. It provides tax relief for qualifying expenditure on both residential and commercial properties.

      Under Finance Bill 2025, the LCI has been enhanced to broaden its scope and increase its attractiveness.

      Key enhancements include:

      • The scheme is now extended from 31 December 2027 to 31 December 2030.
      • Relief will be available in five additional regional centres designated under the National Planning Framework: Athlone, Drogheda, Dundalk, Letterkenny, and Sligo.
      • Broadened Eligibility:
        • Residential and commercial properties built before 1975 now qualify (previously 1915).
        • Commercial-to-residential conversions are eligible regardless of property age, supporting adaptive reuse and housing supply.
      • The maximum relief cap for qualifying enterprises has been increased from €200,000 to €300,000, aligning with updated EU State Aid De Minimis thresholds.
      • For qualifying expenditure incurred on or after 1 January 2026, relief is now granted over two years at 50% per annum, a significant acceleration from the previous 15% per annum over seven years. However, the tax life has been extended from seven to ten years. Unused relief may now be carried forward for up to ten years.
      • The previous prevention on relief claims by property developers or connected parties in certain circumstances has been removed, increasing flexibility and participation.

      These changes reflect an effort to stimulate urban renewal, increase housing supply, and support regional development. However, the take up of this relief has been very low to date, given the limited scope to claim it. It remains to be seen whether the enhancements made will see a material increased take up given the number of conditions to claim the relief.

      Other measures

      Stamp Duty Changes

      The Finance Bill amends Schedule 1 of the stamp duty legislation to clarify that stamp duty applicable to residential property on a conveyance, transfer or lease (for any indefinite term or definite term of 35 years or more) is charged at rates of 1% (on the first €1 million), 2% (on the next €0.5 million) and 6% (on the excess), other than consideration attributable to three or more apartments in an apartment block which is charged at 1% on the first €1 million and 2% on the balance or a “relevant residential unit” (where 10 or more houses/ duplexes are acquired in a 12-month period), which is charged at a rate of 15%.

      The Finance Bill also includes technical amendments in respect of the “resting at contract” provisions that apply to contracts for sale or licenses of land and property thereon. These provisions apply where:

      • at least 25% of the consideration in respect of a contract for sale has been paid, and 
      • no conveyance of the property has occurred, or 
      • 25% of the market value of the land (in respect of a license) has been paid to the licensor, otherwise than as consideration for the sale of the land.

      Where these provisions apply, the agreement is charged with stamp duty as if it were a conveyance or transfer of the land. The technical amendments deem the contract or agreement to be executed on the date the contract or agreement becomes charged with stamp duty. 

      Irish Real Estate Funds (IREFs)


      On Budget Day confirmation was provided that the minister does not intend to introduce entity-level taxation measures for Irish Real Estate Funds (IREFs), and he has committed to undertaking a public consultation on proposals to simplify the IREF regime without limiting its effectiveness.

      Relevant Contracts Tax (RCT)


      The Finance Bill amends the definition of principal contractor for RCT to reflect changes to legislative frameworks for certain housing bodies.

      Interest Limitation Rules


      The Finance Bill expands the definition of “large scale asset” for the purposes of interest limitation rules to include large-scale residential developments (LRDs), under the Planning and Development Act 2024. The enactment of provision is subject to Ministerial Order.

      New Derelict Property Tax to replace Derelict Site Levy


      On Budget Day it was announced that a new tax to be administered by the Revenue Commissioners is to be introduced to target dereliction and will replace the existing Derelict Sites Levy.

      Legislation is to be brought forward as part of next year’s Finance Bill.

      Preliminary registers of dereliction are to be prepared by Local Authorities and published in 2027, and the new tax is to be implemented as soon as possible after that date.

      The minister noted that it is not intended for the new tax to be levied at a rate lower than the current 7% rate of the Derelict Site Levy.

      These Finance Bill 2025 measures, together with the changes already announced by the Government earlier this year in the areas of rent pressure zone reform, planning system reform, revised apartment design guidelines and instructions to the local authorities to zone more land for housing, show a continued focus on the key issues faced by the industry, and should help with the viability challenges on apartments, and lead to more homes being delivered.

      We look forward to further updates under the Government’s revised Housing Plan expected in the coming weeks. We believe that continued engagement between policymakers and stakeholders within the property and construction industry will be essential to support the delivery of homes, infrastructure, and long-term sector resilience.

      Get in touch

      The measures unveiled in Finance Bill 2025 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.

      Contact Carmel Logan of our Tax team today. 

      Carmel Logan
      Carmel Logan

      Partner, Tax, Head of Real Estate

      KPMG in Ireland

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