Indirect Taxes

As expected following the recent Budget the key VAT change in the Finance Bill is that from 8 October 2025 to 31 December 2030, the reduced VAT rate of 9% will apply to the sale of an apartment used or to be used for residential purposes, in an apartment block. As the Bill progresses through the legislative process further amendments may be made to refine this provision and its application.

In line with Budget announcements the Bill also proposes the following changes:

• The VAT rate on electricity and gas will be kept at 9% until 31 December 2030, it was due to revert to 13.5% effective from 1 November 2025;
• Effective from 1 July 2026, the 9% VAT rate will apply to the supply of restaurant and catering services and hairdressing services. Notably entertainment services such as admissions to cinemas, theatres, museums, fairgrounds and amusement parks will continue to be liable to the 13.5% VAT rate; and
• The rate of payment to non-VAT registered farmers to compensate them for the fact that they cannot recover VAT, known as the flat-rate addition, will decrease from 5.1% to 4.5% effective from 1 January 2026.

New measures not announced in Budget 2026

• From 1 January 2026, the standard rate of VAT will apply to the hire of rooms in hotels and guesthouses for use other than as accommodation.
• The Bill contains changes to reflect Revenue’s recent announcement that they will no longer seek to collect payment of VAT waiver cancellation charges for pre-2008 property lettings following the High Court's ruling in Killarney Consortium.
• The VAT registration requirement for farmers has been amended to reflect that they are no longer obliged to VAT register if their annual turnover is likely to exceed the relevant threshold in a rolling 12-month period. Instead, farmers are required to VAT register if their annual turnover exceeds the respective threshold in the current or previous calendar year. 
• The Bill confirms that VAT exemption will apply to financial services that consist of managing the automatic enrolment retirement savings system established, maintained and controlled by An tÚdarás Náisiúnta um Uathrollú Coigiltis Scoir as provided for in the Automatic Enrolment Retirement Savings System Act 2024.
• Penalties have been introduced for payment service providers who fail to comply with record-keeping and reporting requirements and an additional €4,000 penalty for each subsequent quarter that required information remains unreported.

Who will be affected? 

Businesses in the food and catering and hairdressing sectors will benefit from the reduced VAT rate of 9% starting 1 July 2026. 

Households and businesses will continue to benefit from the reduced 9% VAT rate on gas and electricity bills until 31 December 2030. This would help manage the impact of energy price fluctuations.

Property purchasers of a new apartment will see a reduced VAT rate of 9% applied from 8 October 2025 until 31 December 2030, which will potentially lower the overall purchase price.

Farmers who are not VAT registered will receive a slightly reduced flat rate addition of 4.5% in 2026, which maintains support for this sector based on updated economic data. That said, farmers will gain greater certainty on VAT registration obligation through the use of actual turnover as the basis for assessment.

Our view 

We welcome the extension of the reduced 9% VAT rate on gas and electricity bills to 2030 which recognises the burden sustained energy cost increases has placed on households and businesses.

We also welcome the reduction of VAT to 9% for food and catering and hairdressing services from mid-2026 which provides targeted relief to these sectors which have faced significant challenges in relation both to cost inflation and demand in recent years.

The reduced VAT rate on the sale of an apartment is intended to help increase the supply of affordable apartments and it supports more accessible housing options across Ireland. Individuals can expect more affordable housing opportunities as new developments come on stream. The Government introduced this change to support social housing delivery, stimulate the construction sector, and improve housing affordability over the next five years. This change alone may not fix the housing crisis issue however the impacts are expected to be positive for both individuals and business across the sector.