VAT update for the hospitality sector: 9% rate confirmed for food services and revised treatment of accommodation packages

After much lobbying from the hospitality industry, the reduction of the VAT rate for the hospitality sector (food-related services) to 9% as announced in Budget 2026 will come into effect from 1 July 2026. Holiday accommodation services will remain at 13.5% VAT.

In advance of this change, Revenue has updated its Tax and Duty Manuals VAT Treatment of Restaurant and Catering Services and VAT treatment of Guest or Holiday Accommodation to reflect the VAT rate change.

Below we have set out the VAT technical changes which will come into effect, but also what these changes mean for your business and what you should be thinking about from a practical and commercial perspective.  

VAT treatment of restaurant and catering services

Restaurant and catering services consist of a number of components which make up the overall supply. While the provision of the food is a key element, in order to be considered as a “restaurant and catering service”, there needs to be additional support services provided to allow the consumer to immediately consume the food/meal on the premises. Such support services can include, advising on the menu, table service, cutlery and furniture, provision of cloakroom and other facilities.  

The VAT rate applicable to restaurant and catering services, including staff meals, is the first reduced rate of VAT, currently 13.5%. However, from 1 July 2026, this will be further reduced to the second reduced rate, currently 9%.

This change however does not include alcohol, bottled waters, soft and sport drinks, and vegetable juices even if supplied as part of a catering service. These items will remain liable to VAT at the standard rate, currently 23%, even if sold as part of a catering or food service. Fruit juices should fall within the scope of the second reduced rate of VAT where provided as part of a restaurant or catering service.  

Catering services provided in hospitals and schools will not be impacted and will remain exempt from VAT. Catering provided on off-shore oil rigs as well as ships or aircraft in the course of international passenger transport will continue to be subject to the zero rate of VAT (where the place of departure and destination are within the EU) or be considered as being outside the scope of VAT. 

While restaurant and catering services are considered a service from a VAT perspective, the supply of takeaway food and drink is considered to be a supply of goods. With effect from 1 July 2026, the supply of hot takeaway food will be reduced to the second reduced rate.  

Cold takeaway food will continue to be subject to the 0% rate of VAT.  

Consideration will need to be given to the multiple and composite supply rules when it comes to combination meal deals (i.e. hot or cold food and drink combination).  

Any delivery fee charged as part of a takeaway supply will continue to be subject to the standard rate of VAT.  

VAT treatment of mixed supplies of accommodation and food services

While the supply of guest or hotel accommodation will continue to be liable to VAT at the first reduced rate, the second reduced rate will apply from 1 July 2026 to any restaurant or catering services supplied. This VAT treatment of holiday packages consisting of both accommodation and food services will also need to be reviewed as these will now fall within the parameters of multiple and composite supplies.  

• Accommodation and food services supplied together will be treated as separate supplies subject to different VAT rates.  
• This means that guest accommodation will remain liable at the first reduced rate of VAT, currently 13.5%, while food services will now attract the second reduced rate of VAT, currently 9%, even if supplied as single holiday package. 
• Where a single all-inclusive charge is applied, the consideration must be apportioned on a fair and reasonable basis between the accommodation and food elements, with each element subject to their respective VAT rates. 

VAT practical implications for businesses

With the changes taking effect from 1 July 2026, it is imperative that impacted businesses ensure systems are updated and able to apply the appropriate VAT rates to ensure continued VAT compliance. In particular: 

• Internal controls and ERP systems will need to be updated to ensure the correct VAT rates are applied, particularly where supplies span the relevant changeover dates or involve bundled services. 
• Businesses should ensure the relevant stakeholders within the business are trained and aware of the upcoming changes to enable them to identify any potential errors.  
• The implications of payments in advance will need to be factored in as any deposits/advance payments may be subject to the first reduced rate, with the second reduced rate apply on the final payment when the supply take place. This will result in multiple VAT rates applying on a single supply of guest accommodation.  
• Where a credit note is needed, increased complexity could arise as the VAT rate applicable on the credit note, should be the VAT rate charged on the invoice. Therefore, a post 1 July 2026 credit note for guest accommodation services could reflect a VAT rate of 13.5%. 
•  Pricing models should be reviewed to ensure, where appropriate, savings are being passed onto customers and the business’s profit margin is in line with expectations.  
• Contracts which note a VAT-inclusive price should be reviewed where agreed pre-1 July 2026 but the supply takes place post-1 July 2026.    
• VAT invoices should clearly identify each component of a packaged service of accommodation and food as well as their applicable VAT rates. The apportionment methodology applied to packages will also need to be reviewed.  
• Weddings, events, and conference packages which may include room hire, guest accommodation, catering, and ancillary services may require a more detailed VAT analysis. With regard to the hire of a conference or meeting room facility, Revenue confirmed a number of months ago that the standard rate of VAT, currently 23%, should apply. Therefore, certain invoices may attract three separate VAT rates.   
• Vouchers and gift cards redeemed after 1 July 2026 will also require careful consideration, particularly where single and multi-purpose vouchers are involved. 
• On the recipient’s side, in particular where no VAT recovery entitlement exists on costs, the timing of a purchase or the potential to defer invoices being raised, could result in a VAT saving of 4.5%.  
• The above changes should be considered in line with Irish VAT law and CJEU case law, in particular J-GmbH, D and D GmbH & Co. KG (C‑409/24 to C-411/24) which you can read about further here, where the CJEU noted that hotel operators should not assume that all elements included in a composite accommodation package qualify for the reduced VAT rate.