Data shows that the Irish Government’s R&D tax credit is directly driving new investment.

The Industry Research and Development Group (IRDG) and KPMG have released their 2026 Ireland Innovation Index, the fourth annual report gathering detailed responses from companies actively engaged in innovation across Ireland.

This year’s findings show that, following a jump from 30pc to 35pc in the most recent Government budget, the R&D tax credit has led to a significant boost in R&D activity. Almost 70pc of the 587 organisations who contributed their data said they have increased R&D spend over the past three years and 77pc expect to increase investment over the next three years.

58pc of businesses explained that they are funnelling the extra 5pc credit directly into currently existing R&D projects, while 57pc said that it will go towards supporting completely new R&D activity. Nearly 40pc of survey participants said the enhanced incentive will support them hiring or retaining dedicated R&D staff.

IRDG’s and KPMG’s research also highlighted the role of the tax credit in attracting and maintaining R&D activity and jobs in Ireland, with more than half (54pc) of contributing multinational companies saying that without the credit, 10pc or less of their R&D would take place in Ireland.

Competitive investment

The report also identified some challenges – for example, despite the R&D tax credit acting as a critical pillar of Ireland’s competitiveness, underpinning significant investment decisions, many forms of modern innovation sit outside the traditional fields of science and technology, which are qualifying activity areas in relation to the credit.   

IRDG and KPMG noted this tends to exclude innovation such as digital transformation, design-led innovation, advanced process innovation and business-model innovation. 

As a result, 71pc of those surveyed said a specific new innovation tax credit would enable more innovative work to take place in Ireland, while 67pc believe it would support new product and service development.

The report also identified a significant participation gap between large businesses and smaller firms. SMEs were found to be twice as likely to be aware of available supports, but not use them. Those surveyed also remain markedly less satisfied with the timing of R&D tax credit refunds, which creates particular cashflow challenges for smaller innovation-led businesses.

The research found that while Ireland has built a strong R&D support framework, “significant practical barriers remain for innovative companies, including SMEs, that the Government most wants to encourage”.

Commenting on the report, Dermot Casey, the CEO of IRDG, said: “Ireland’s innovation economy continues to demonstrate resilience and ambition despite global turmoil. The recent R&D tax credit reforms are working – 77pc of the 587 companies surveyed plan to increase R&D spend over the next three years.

“But structural gaps remain. Public R&D investment is half the EU average. On non-R&D innovation, Ireland ranks 26th of 27 in the EU for design applications, and last for trademarks. 71pc of companies back an innovation tax credit designed for AI, digitalisation and design, areas the current credit can’t reach. 

“With 67pc now ranking AI and disruptive technologies among their top priorities, up from 45pc two years ago, the case for the new credit is urgent. Combined with a doubling of public R&D over three years, these investments will build long-term resilience, competitiveness and growth.”

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