Derek Henry, Partner & Head of Tax recently contributed to Business Plus magazine where he highlighted growing demand for tax advisory due to OECD Pillar Two rules, intensified Revenue interventions, and increased transfer pricing regulations. He praised Budget 2025’s R&D tax credits and VAT threshold changes, noting these will aid SMEs, though further simplification is needed for investment schemes. Read his full commentary below.
What aspects of business-related tax are busier for your firm now than in former years? Are there any recent developments in the firm’s tax practice that you want to mention?
BDO has seen significant changes in the demand for tax advisory services - The introduction of the OECD’s Pillar Two has created new challenges for businesses operating across borders, particularly in ensuring they meet the requirements of the minimum tax rule. Companies are seeking advice on how to align their operations with these tax standards while maintaining efficiency and minimising disruptions. Aligned with this area, our transfer pricing team are assisting clients deal with the relatively new transfer pricing legislation and the update in Revenue review activity in this area.
Additionally, BDO are seeing a strong upward trend in demand for our Employment Tax and Global Mobility services. This growth is being driven in part by the increased level of Revenue Interventions in this space, stemming from the introduction of real-time payroll tax reporting back in 2019 and Revenue significantly developing out their data analytics since then. BDO continues to invest in building robust tax technology solutions and streamlining reporting processes while enabling businesses to remain agile and fully compliant. This ongoing investment reflects the growing importance BDO have put on automation and digital solutions in navigating complex tax regulations.
What issues have your clients faced in making arrangements for the minimum effective corporation tax (Pillar Two) rules introduced in January? How have you supported them with this?
One of the primary issues businesses face is the complexity of gathering and reporting financial data across multiple jurisdictions to ensure compliance. This involves adapting their existing tax structures and accounting systems to accommodate new global standards. Many clients have had to invest in upgrading their tax technology infrastructure to meet the heightened reporting requirements, particularly as the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR) introduce new compliance burdens.
To support our clients during this transition, we have provided comprehensive analysis to identify areas where existing tax strategies fall short of Pillar Two requirements. The firm has worked closely with businesses to implement the necessary tax calculation tools and software solutions that can handle the data-intensive demands of Pillar Two.
Across our international network, BDO has also provided detailed guidance on the documentation and compliance processes associated with Pillar Two, helping clients understand the reporting obligations under the new global tax framework. This support has been essential in ensuring businesses can comply with the regulations without facing penalties or operational disruptions. By offering both technical solutions and strategic advice, we are supporting our clients to navigate the complexities of Pillar Two.
How pleased are you (or otherwise) that Budget 2025 is ‘good for business’? Which of the budget business/tax measures will be most useful to your clients?
We are cautiously optimistic about Budget 2025, highlighting that while it introduces several business-friendly measures, the overall impact may be tempered by broader economic challenges. Budget 2025 includes notable provisions such as increased R&D tax credits. This is expected to provide a significant cash flow benefit to smaller companies in innovative sectors. Additionally, the VAT registration thresholds have been raised, which will ease administrative burdens for smaller businesses and encourage entrepreneurship. These measures are particularly beneficial for SMEs and early-stage companies, aligning with BDO’s focus on supporting growth-oriented businesses.
However, we note that some of the measures, while helpful, may not go far enough to address the long-term challenges facing businesses. For instance, while the R&D tax credit increase is welcomed, there is still room for simplification in the Employment Investment Incentive Scheme (EIIS), which remains complex and difficult for many companies to navigate. Simplification of reliefs and easier access to financing through these schemes would be more impactful for the wider business community.
In terms of infrastructure, the budget’s emphasis on long-term investments in housing, water, and energy is viewed positively, particularly the allocations for Irish Water and the Land Development Agency. These investments aim to address key bottlenecks in infrastructure that have been a challenge for businesses. However, some skepticism remains regarding whether the budget will significantly ease the ongoing housing crisis, which continues to pose issues for both businesses and employees. Overall, while we acknowledge some positive aspects of Budget 2025, the firm remains focused on how these measures will be implemented and whether they will deliver meaningful benefits in the long term.
Have low, medium or high-income earners fared best from the income tax changes in Budget 2025?
Budget 2025 includes several income tax measures that predominantly benefit low and middle-income earners, with adjustments to the income tax bands, tax credits, and universal social charge (USC) thresholds. The income tax standard rate band has been increased from €42,000 to €44,000 for single earners, and from €51,000 to €53,000 for married couples with one earner. This increase allows more middle-income earners to benefit from the lower tax rate, preventing them from being pushed into higher tax brackets as wages rise. Similarly, the personal tax credit, PAYE credit, and earned income credit have all been increased to €2,000, providing additional relief for employees and self-employed individuals.
For low-income earners, the widening of the USC bands ensures that recent increases in the national minimum wage will not push workers into higher tax rates. Specifically, the 2% USC band now applies to income up to €27,382, compared to the previous cap of €22,920. This change helps to shield low-income workers from higher taxes, ensuring that they retain more of their earnings despite wage increases.
High-income earners, however, see less direct benefit from the budget’s income tax measures. While they will benefit from the widened tax bands and credits, there were no cuts to the higher tax rates, meaning their tax burden remains largely unchanged. The continuation of the USC 3% surcharge on self-employed income over €100,000 unfortunately has not been addressed and may have been a way to give something back to higher income business people. In addition, the introduction of higher stamp duty rates on property purchases exceeding €1.5 million may disproportionately affect high earners. Overall, Budget 2025 provides targeted relief to lower and middle-income earners, reflecting the government’s focus on addressing cost-of-living pressures while maintaining fiscal responsibility.
Any further thoughts on tax measures in Budget 2025 or other developments coming down the line that might be of interest to our SME readers?
For SMEs, Budget 2025 offers several tax measures that are expected to support growth, innovation, and cash flow. One of the key provisions is the increase in the R&D tax credit which will particularly benefit small and early-stage companies. This increase provides immediate cash-flow relief for businesses engaging in research and development, a critical area for innovation-driven SMEs. Additionally, the VAT registration thresholds have been raised to €42,500 for services and €85,000 for goods, reducing the administrative burden on smaller businesses and enabling them to focus on scaling their operations.
Another positive development is the extension of reliefs under the Employment Investment Incentive Scheme (EIIS) and Start-Up Relief for Entrepreneurs (SURE). These reliefs have been extended until 2026, providing further opportunities for SMEs to attract investment.
Coming down the line we look forward to participating in the review of the Interest Deductibility rules, the outcome of the Funds Sector review and the potential further expansion of the participation exemption to branches.
Additionally as sustainability reporting becomes more embedded we expect to see more emphasis on tax reporting in the future.
Content adapted from Business Plus Magazine.
What aspects of business-related tax are busier for your firm now than in former years? Are there any recent developments in the firm’s tax practice that you want to mention?
BDO has seen significant changes in the demand for tax advisory services - The introduction of the OECD’s Pillar Two has created new challenges for businesses operating across borders, particularly in ensuring they meet the requirements of the minimum tax rule. Companies are seeking advice on how to align their operations with these tax standards while maintaining efficiency and minimising disruptions. Aligned with this area, our transfer pricing team are assisting clients deal with the relatively new transfer pricing legislation and the update in Revenue review activity in this area.
Additionally, BDO are seeing a strong upward trend in demand for our Employment Tax and Global Mobility services. This growth is being driven in part by the increased level of Revenue Interventions in this space, stemming from the introduction of real-time payroll tax reporting back in 2019 and Revenue significantly developing out their data analytics since then. BDO continues to invest in building robust tax technology solutions and streamlining reporting processes while enabling businesses to remain agile and fully compliant. This ongoing investment reflects the growing importance BDO have put on automation and digital solutions in navigating complex tax regulations.
What issues have your clients faced in making arrangements for the minimum effective corporation tax (Pillar Two) rules introduced in January? How have you supported them with this?
One of the primary issues businesses face is the complexity of gathering and reporting financial data across multiple jurisdictions to ensure compliance. This involves adapting their existing tax structures and accounting systems to accommodate new global standards. Many clients have had to invest in upgrading their tax technology infrastructure to meet the heightened reporting requirements, particularly as the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR) introduce new compliance burdens.
To support our clients during this transition, we have provided comprehensive analysis to identify areas where existing tax strategies fall short of Pillar Two requirements. The firm has worked closely with businesses to implement the necessary tax calculation tools and software solutions that can handle the data-intensive demands of Pillar Two.
Across our international network, BDO has also provided detailed guidance on the documentation and compliance processes associated with Pillar Two, helping clients understand the reporting obligations under the new global tax framework. This support has been essential in ensuring businesses can comply with the regulations without facing penalties or operational disruptions. By offering both technical solutions and strategic advice, we are supporting our clients to navigate the complexities of Pillar Two.
How pleased are you (or otherwise) that Budget 2025 is ‘good for business’? Which of the budget business/tax measures will be most useful to your clients?
We are cautiously optimistic about Budget 2025, highlighting that while it introduces several business-friendly measures, the overall impact may be tempered by broader economic challenges. Budget 2025 includes notable provisions such as increased R&D tax credits. This is expected to provide a significant cash flow benefit to smaller companies in innovative sectors. Additionally, the VAT registration thresholds have been raised, which will ease administrative burdens for smaller businesses and encourage entrepreneurship. These measures are particularly beneficial for SMEs and early-stage companies, aligning with BDO’s focus on supporting growth-oriented businesses.
However, we note that some of the measures, while helpful, may not go far enough to address the long-term challenges facing businesses. For instance, while the R&D tax credit increase is welcomed, there is still room for simplification in the Employment Investment Incentive Scheme (EIIS), which remains complex and difficult for many companies to navigate. Simplification of reliefs and easier access to financing through these schemes would be more impactful for the wider business community.
In terms of infrastructure, the budget’s emphasis on long-term investments in housing, water, and energy is viewed positively, particularly the allocations for Irish Water and the Land Development Agency. These investments aim to address key bottlenecks in infrastructure that have been a challenge for businesses. However, some skepticism remains regarding whether the budget will significantly ease the ongoing housing crisis, which continues to pose issues for both businesses and employees. Overall, while we acknowledge some positive aspects of Budget 2025, the firm remains focused on how these measures will be implemented and whether they will deliver meaningful benefits in the long term.
Have low, medium or high-income earners fared best from the income tax changes in Budget 2025?
Budget 2025 includes several income tax measures that predominantly benefit low and middle-income earners, with adjustments to the income tax bands, tax credits, and universal social charge (USC) thresholds. The income tax standard rate band has been increased from €42,000 to €44,000 for single earners, and from €51,000 to €53,000 for married couples with one earner. This increase allows more middle-income earners to benefit from the lower tax rate, preventing them from being pushed into higher tax brackets as wages rise. Similarly, the personal tax credit, PAYE credit, and earned income credit have all been increased to €2,000, providing additional relief for employees and self-employed individuals.
For low-income earners, the widening of the USC bands ensures that recent increases in the national minimum wage will not push workers into higher tax rates. Specifically, the 2% USC band now applies to income up to €27,382, compared to the previous cap of €22,920. This change helps to shield low-income workers from higher taxes, ensuring that they retain more of their earnings despite wage increases.
High-income earners, however, see less direct benefit from the budget’s income tax measures. While they will benefit from the widened tax bands and credits, there were no cuts to the higher tax rates, meaning their tax burden remains largely unchanged. The continuation of the USC 3% surcharge on self-employed income over €100,000 unfortunately has not been addressed and may have been a way to give something back to higher income business people. In addition, the introduction of higher stamp duty rates on property purchases exceeding €1.5 million may disproportionately affect high earners. Overall, Budget 2025 provides targeted relief to lower and middle-income earners, reflecting the government’s focus on addressing cost-of-living pressures while maintaining fiscal responsibility.
Any further thoughts on tax measures in Budget 2025 or other developments coming down the line that might be of interest to our SME readers?
For SMEs, Budget 2025 offers several tax measures that are expected to support growth, innovation, and cash flow. One of the key provisions is the increase in the R&D tax credit which will particularly benefit small and early-stage companies. This increase provides immediate cash-flow relief for businesses engaging in research and development, a critical area for innovation-driven SMEs. Additionally, the VAT registration thresholds have been raised to €42,500 for services and €85,000 for goods, reducing the administrative burden on smaller businesses and enabling them to focus on scaling their operations.
Another positive development is the extension of reliefs under the Employment Investment Incentive Scheme (EIIS) and Start-Up Relief for Entrepreneurs (SURE). These reliefs have been extended until 2026, providing further opportunities for SMEs to attract investment.
Coming down the line we look forward to participating in the review of the Interest Deductibility rules, the outcome of the Funds Sector review and the potential further expansion of the participation exemption to branches.
Additionally as sustainability reporting becomes more embedded we expect to see more emphasis on tax reporting in the future.
Content adapted from Business Plus Magazine.