Ireland’s innovation agenda sharpened in 2026 as AI moved into the mainstream, businesses signalled they would reinvest the higher R&D tax credit, and policymakers were urged to go further with a separate Innovation Tax Credit, according to the latest Ireland Innovation Index. 

The annual survey – Ireland’s Innovation Index – produced by IRDG and KPMG, drew 587 company responses, the largest sample in the series, and found that 67% of RDI-active respondents now see AI and disruptive technology as a priority over the next one to three years, up from 45% in 2024.

The report says the 30% to 35% R&D tax credit increase under Finance Act 2025 is already influencing behaviour. Among respondents, 58% said they would channel the extra credit into existing R&D projects, 57% into new projects and 39% into hiring or retaining R&D staff.

Business sentiment remained resilient despite geopolitical and tax uncertainty. The report says 69% of respondents increased RDI spending over the past three years, while 77% expect to increase spend over the next three years. Large-company optimism recovered after a weaker 2025, although the report notes that SMEs still face a sharper administrative and cashflow burden when accessing support.

SME access gap

A major theme of the report is the persistent SME take-up gap. The document says 61% of SMEs claim the RD tax credit, compared with 81% of large companies, and that 14% of SMEs are aware of state supports but do not claim them, versus 7% of large companies. It also says SMEs are less satisfied with refund timing and more likely to cite administrative time, grant complexity and funding uncertainty as barriers.

The report argues that these issues should shape the next phase of reform. It recommends faster refund instalments, lower administrative burden, and more targeted SME support, including a specialist RD tax credit unit within Revenue.

Why AI matters

AI is the standout strategic shift in this year’s survey. The report says respondents increasingly describe AI as embedded in operations, not merely experimental, and that cost reduction and operational efficiency have also become much more prominent priorities. It adds that many AI- and digitalisation-led projects may fall outside the current RD tax credit definition, which is why respondents and the report both support a separate Innovation Tax Credit.

The proposed Innovation Tax Credit is presented as a way to support non-Frascati innovation activity such as digital innovation, business-model change and AI deployment. According to the survey, 71% of respondents believe such a credit would enable more innovative work in Ireland, and 45% think it would increase IP creation and protection.

Policy implications

The document’s overall message is that Ireland’s innovation position is improving, but not fast enough on the underlying metrics that matter for origination of new ideas. It points to weak public R&D investment, low SME penetration in supports, and a dependence on FDI-weighted activity to lift headline rankings. At the same time, it says Ireland’s strong innovation rankings and the 35% RD tax credit should be maintained and used as a platform for further reform.

If you have any questions about R&D tax credits or Grant Funding please get in touch with ABGI Ireland.