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Finance Bill 2025, as initiated, (the Bill) sets out the legislative changes required to implement the Budget Day announcements of 7 October 2025. The draft Bill provides for further VAT changes, that were not announced on Budget Day and provides some clarity on Budget 2026 measures.
By way of summary and as published in our earlier insight piece, the Irish Government announced specific VAT measures in its Budget 2026. These were primarily VAT policy measures designed to support businesses and the viability gap in apartment construction. These have now been reflected in the Bill, along with some clarification businesses need.
Summary of key VAT measures
We have summarised below the key legislative changes introduced under the Bill.
VAT rate cut to 9% on new apartments
Budget 2026 announced the VAT rate to 9% for the sale of completed apartments. The Finance Bill now confirms the following details with respect to this change:
- The rate cut applies to the supply of housing, as part of a social policy, being the supply of an apartment, used or to be used for residential purposes.
- The rate cut only applies to the sale of completed apartments for which the Bill provides clarity on the meaning of a ‘completed apartment’. This does not include sites and development agreements, such as a contract for sale of a site, and the construction of a block of apartments. This may have inequitable impact, especially for housing bodies that have entered forward-funding agreements for the development of completed apartments.
- The 9% rate comes into effect on 8 October 2025 until 31 December 2030.
VAT on property waiver of exemptions and cancellation sums
Under existing VAT legislation, where a waiver of exemption exercised on a pre-1 July 2008 property is cancelled, a cancellation sum is payable to Revenue based on the excess of input VAT reclaimed and output VAT paid to Revenue during the time period in which the waiver was in place. This is in effective a clawback for VAT reclaimed in excess of VAT paid.
The Bill provides that VAT on property waiver of exemptions and cancellation sums will no longer be applicable and will be removed from the VAT Act, from the implementation of the Finance Act 2025. This follows a recent High Court judgement (Killarney Consortium v. The Revenue Commissioners [2024] IECH 732) where the High Court ruled that cancellation sums contravened EU law and the principle of fiscal neutrality.
It is worth noting that Revenue had also updated their Tax and Duty Manual on Waiver of Exemption – Transitional Measures in June 2025 confirming that it will no longer collect cancellation sums with effect from 20 December 2024.
This is a welcome technical measure, which means that the cancellation of waivers will not give rise to any VAT claw-back.
VAT on the hire of rooms in hotels and guesthouses
Currently, the reduced VAT rate of 13.5% applies on the letting of rooms in hotels and guesthouses notwithstanding where the letting of the room was for the purposes of an accommodation or a meeting conference. Conversely in respect of a property designed purely for conference facilities, where a room is booked in that facility, it is liable to the standard rate (currently 23%).
This was seen within the industry as being inequitable such that hotels where at an advantage when rooms were supplied for purposes other than accommodation. The Finance Bill provides that the standard rate of VAT will apply on the rental of rooms in hotels and guesthouses where it used for purposes other than accommodation.
Hotels and guesthouses will need to carefully consider the nature of its room lettings to ensure the correct VAT rate applies from 1 January 2026.
Management of Automatic Enrolment Retirement Savings System
The Bill provides that a VAT exemption on financial services will be extended to the management of Automatic Enrolment Retirement Savings System. A timely introduction as auto-enrolment comes into force from 1 January 2026. Guidance from Irish Revenue on this change will be welcome.
Payment Services Providers
The Bill introduces a penalty of €4,000 on the non-reporting of cross-border payments by Payment Service Providers. Further penalties of €4,000 may also apply on each missed filing dates.
Next steps
We recommend keeping a watching brief on these measures as the Bill moves through the various stages of Irish parliamentary consideration, referred to as report and committee stage amendments. Further changes may be made, until the Bill is signed into law in the coming months.
Additionally Irish tax practitioners will be invited, through the Tax Administration Liaison Committee (which RSM Ireland is represented on) to engage with Irish Revenue on any of the VAT measures which require clarification and/or guidance. Please reach out to your usual RSM contact for clarify or feedback on any matters relating to the draft Bill.
