Irish MedTech: Leveraging R&D Incentives for CMO’s & CDMO’s

“Ireland’s MedTech sector thrives on collaboration and innovation, supported by robust national incentives to support research, development and innovation”

As medical devices become more complex, and digitisation, automation and AI integration evolves, many med tech companies are seeking to collaborate with specialist design, development, automation and manufacturing firms. These Contract Manufacturing Organisations (CMOs) and Contract Development and Manufacturing Organisations (CDMOs) play a vital role in sustaining a dynamic, growing industry. As technology driven partners, CMOs and CDMOs bring distinctive expertise to projects and should actively leverage RD&I incentives to support their operations.

Ireland is widely recognised as an advanced hub for medical device development and manufacturing, and we continue to outperform global benchmarks, not just in terms of scale, but in our ability to adapt, collaborate, and innovate. With nine of the world’s top ten med tech companies operating here, and many CMOs and CDMOs in the life sciences sector, Ireland has created a strong ecosystem for the development and launch of next-generation medical technologies. A key driver is the convergence of targeted RD&I incentives, a highly skilled labour force, and a mature outsourcing environment that enables collaboration.

Budget 2026 has reinforced Ireland’s position as a leading destination for research, development and innovation, with the R&D tax credit rate increased from 30% to 35%, which will typically apply to companies with an accounting year-end of 31 December 2026 (and certain companies with a rolling year end in December 2026) and periods thereafter.

This enhancement significantly improves the return on qualifying R&D spend, including design, prototyping, testing, and process development, and is now among the most generous regimes globally. The first-year refund threshold has also been raised to €87,500, providing faster access to funding, particularly for SMEs and early-stage companies. This is important given circa 80% of the Ireland’s med tech companies are SMEs.

Importantly, the Government has signalled further improvements to the scheme through the “R&D Compass”, which will consider targeted changes to the R&D Tax credit to better align with industry practices, for example, in the areas of outsourcing and qualifying expenditure definitions. These changes, once finalised, will be of particular interest for companies leveraging external technical partners.

This will be particularly important in med tech, where development cycles are increasingly collaborative. Indeed, the medical device contract manufacturing market is projected to reach $171 billion by 2032, an increase from an estimated $845 billion in 2025. It’s clear that CMOs and CDMOs play a pivotal role in accelerating product development and enabling readiness.

Ireland’s ecosystem of specialist providers offers deep expertise in concept design, prototyping, design-for-manufacture, and scalable production. For early-stage firms, this model enables clinical-grade development without the capital burden of internal infrastructure. For multinationals, it supports rapid scaling of new product lines and outsourcing of non-core assets. In both cases, the result is faster time-to-market and reduced risk.

Beyond manufacturing, Ireland’s network of technical service providers, from precision engineering companies, digitalisation and automation, sterilisation and packaging specialists, adds significant depth. These partners are often central to completing multifaceted, complex, R&D projects. Indeed, CMOs and CDMOs often stand-up independent R&D projects to deliver on their partnership projects, as well as internal projects to enhance their own capability.

To fully benefit from this ecosystem, companies must think strategically about how they structure their projects, ensuring the R&D incentives are availed of. For example, a multinational med tech firm developing a cardiovascular prosthesis might partner with a CMO located in Ireland for early design development, pilot production, and component manufacturing of a novel catheter delivery system. Within this profile of project, the CMO may be in a position to claim an R&D tax credit on the eligible costs.

Building on this, we present a worked example to demonstrate the potential benefit. Let’s assume the CMO is undertaking a €3 million R&D project to develop an advanced steerable catheter, of which €2.5million qualifies for the R&D tax credit. The CMO is contracted across the full-cycle R&D, from concept design and prototyping to production process development, performed on behalf of a multinational med tech client.

To illustrate the potential financial benefit, the workflow below shows a breakdown in expenditure across the main potentially qualifying categories. In this example, the net benefit to the CMO could be over €1.2million if they are eligible to claim the R&D tax credit. This equates to approximately 14 full time engineers for one year.

*This example accounts for the increased R&D tax credit rate to 35% announced in Budget 2026.

This example demonstrates the value of the R&D tax credit, reducing the net cost of the project by nearly one-third for eligible companies.

In conclusion, as we look to the future there is a precipitous transition across all industries, mainly driven by AI. This will come with great benefits, and novel challenges which will strengthen new program growth in CMO’s and CDMO’s. As complexity increases, and product development evolves, the Irish med tech sector is primed to deliver at the cutting edge of R&D.

Our med tech sector continues to thrive not only because of its manufacturing legacy but because of its ability to evolve and grow. Innovation today is increasingly delivered through collaborative models, CMOs and CDMOs are in a strong position to leverage RD&I incentives to support their business.

Learn more

In KPMG’s R&D Incentives Practice we have significant experience in identifying the right approach across the varied funding mechanisms and can add value to your RD&I. Go to kpmg.ie/RandD to find out more.

Guest article written by Dr Eoin McCarthy, Associate Director, in KPMG’s R&D Incentives Practice.