The main VAT changes announced relate to the introduction of 9 percent VAT rate for certain areas of the hospitality and retail sector and on the construction of new apartments.
VAT on food and catering businesses and hairdressing services
From 1 July 2026, the VAT rate applied to businesses in food and catering and hairdressing services is being reduced from 13.5 percent to 9 percent. It is estimated that this measure will cost €232 million in 2026 and €681 million in a full year.
VAT on gas and electricity
The reduced VAT rate of 9 percent on gas and electricity bills which was due to expire on 1 November 2025 will be extended until 31 December 2030.
VAT on new apartments
The VAT rate applied to the construction of new apartments is to be reduced from 13.5 percent to 9 percent. This reduced rate will apply from 8 October 2025 and will last until 31 December 2030.
In our Pre-Budget submission, we have called for a targeted, time limited measure to address market failures in the delivery of apartments. It is hoped that the VAT reduction will address this market need effectively and efficiently.
VAT Modernisation and electronic invoicing
The Minister announced the commencement of a phased implementation of domestic electronic invoicing for business-to-business (B2B) transactions. This implementation supports the EU approved VAT in the Digital Age (ViDA) initiative which aims to modernise the EU’s VAT system.
Further details on this initiative will be outlined in a paper to be published by Revenue tomorrow.
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