Budget 2026: VAT

The Minister confirmed the heavily flagged reduction of the VAT rate from 13.5% to 9% applicable to the hospitality (food-related services). This was heavily lobbied for, as was an equivalent rate reduction for the hotel industry, which has not followed.  

The proposed reduction is not due to be effective until 1 July 2026. Again, this was well flagged and is really a measure to temporarily defer the cost of the relief.  

As with all tax changes, the devil will be in the detail and in due course it will be important to review the legislation giving effect to this change. Businesses will need to plan accordingly to configure their finance and ERP systems for these changes.  

The Minister for Finance confirmed a rate reduction from 13.5% to 9%, in respect of sale of completed new apartments, with effective from midnight on Budget Day subject to a Financial Resolution being passed.  

Consideration will need to be given to the implementation impact of the change, specifically, the timing of the change and whether a VAT inclusive or exclusive price has been agreed.  

VAT is payable at the point of time the conveyance occurs based on the rate in place, therefore a sale of an apartment occurring from 8 October, will be at the second reduced rate.  

This is welcome measure to boost housing supply and is subject to expire on 31 December 2030, thus being a temporary measure to help shore up housing supply.  

A further degree of certainty has been announced with confirmation that the reduced rate of VAT applicable to the supply of gas/electricity of 9% until 31 December 2030.

This change will be welcome relief to householders/businesses, struggling with the continuing rise in energy prices in the context of energy credits no longer being available.    

Finally, in the context of modernisation of trade and ViDA (VAT in the Digital Age) changes, the Minister has announced that Irish Revenue will begin a roll out of mandatory domestic B2B electronic invoicing.

Further details of this initiative is expected shortly from the Revenue Commissioners and will be closely monitored by practitioners and advisors.  

This will be significant shift in how businesses manage invoicing and VAT compliance. We expect due consideration will be taken by the Department of Finance and the Revenue Commissioners in consultation with tax practitioners and industry bodies to ensure the proposed phase roll out is practical and not unduly burdensome for businesses.