The Finance Bill 2025 introduces a number of rule changes to Ireland’s VAT regime.
These are aimed to deliver on measures announced in the Budget speech, as well as clarifying and updating other VAT rules on some additional points. As with any rule changes, businesses need to assess these changes to determine their impact on VAT related processes and associated financial and pricing models.
The Bill confirms the continuation to 31 December 2030 of the 9% VAT rate on the supply of gas and electricity. This extends the existing VAT rate which was due to expire on 1 November 2025 and would have reverted to the 13.5% rate.
The 9% rate of VAT will apply from 1 July 2026 to hairdressing services and as well publicised, to restaurant and catering services (excluding alcohol and soft drinks).
In relation to the change for restaurant and catering services, this is a partial reintroduction of the reduced rate previously in place for the hospitality sector which covered for example, certain hotel or holiday accommodation services. The new measure covers a narrower range of activities than before, being limited to specified restaurant and catering services.
For operators in the sector providing a mix of hospitality activities, this change will require appropriate actions to identify the portion of any overall charge which relates to activities liable at the 9% VAT rate, and distinguishing this from charges liable at other rates.
The Finance Bill introduces a change to the VAT rate currently applying to charges for meeting rooms in a hotel or guesthouse. To date, related charges have been accepted as liable to VAT at the 13.5% rate. From 1 January 2026, such charges will be liable to VAT at the standard 23% rate.
For the housing sector, the 9% VAT rate will apply to the sale of certain apartments as Housing as part of a social policy which are “used or to be used” as residential accommodation. The apartments covered must be in an apartment block, with that term based on the related definition in Stamp Duty legislation. At the time of writing, the Finance Bill limits application of the reduced rate to the supply of an eligible apartment and in particular, does not extend the reduced rate to services for the standalone construction of such an apartment. That does not therefore cover different purchase models involving for example, separate purchase and construction arrangements. It remains to be seen what if any additional measures will be introduced to extend the rate reduction for other apartment-related supply arrangements.
VAT waiver of exemption rules are measures in place prior to the introduction in 2008 of the current VAT and property rules. The waiver of exemption measures are relevant to lettings of property for terms of less than 10 years duration and enabled landlords to reclaim and preserve VAT recovery on such lettings. These measures were the forerunner to current option to tax measures which may apply to certain property lettings and require VAT to be charged on rents while entitling VAT recovery for the landlord. The Finance Bill measures will bring about an automatic cancellation of any waiver of exemption election, effective from the date of passing of the Bill. For businesses who have relied on a waiver of exemption election and currently have short term lettings, action is required to access the impact of the automatic cancellation of the waiver, including the scope for utilising current option to tax actions to preserve VAT recovery, if and where applicable.
The Bill will bring about a reduction from 5.1% to 4.5% in the farmers’ flat-rate addition. This will be effective from 1 January 2026. The flat rate addition is the mechanism by which farmers (as defined) are compensated for VAT on costs which they are unable to recover due to not being registered for VAT.
Separately, the Finance Bill includes some updates relevant to the time period used for assessing a farmer’s turnover and related obligation to register for VAT. The changes will update the review period from the current any continuous period of 12 months to the current or previous calendar year. This change is to be effective from 1 January 2026.
The bill introduces a €4,000 fine for payment service providers who do not meet CESOP documentary and reporting requirements on time, with a further €4,000 fine for each late submission
The Finance Bill introduces an extension to existing VAT exemption measures for certain Financial Services. The update is to cover services comprising the managing of the Automatic Enrolment Retirement Savings System. As a result, related charges will not be subject to VAT, with this consistent with the treatment of a wide range of financial services. This treatment will also need to be considered in the context of the service provider’s overall VAT recovery position.
The changes introduced will impact operators at a minimum, by requiring an assessment of the financial impact on pricing models as well as any process revisions needed to ensure the appropriate amount of VAT is captured at the relevant time. Contract terms for sales may also need to be reviewed depending on sales price being stated as inclusive or exclusive of VAT. This is also relevant for any stage or pre-payments where different rates of VAT apply at the time of part-payment versus a later delivery. For operators who are unable to recover VAT, the cost impact of any VAT rate increases will need to be considered, in particular, where the spend is significant.
Should you wish to discuss any aspect of the VAT changes which may impact your business, please contact our VAT team.
Disclaimer: While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, RBK do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.
Author: John Moore
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