Agreement on restoring 9% rate from 13.5% on food-led hospitality sector, entertainment and hairdressing
The incoming Irish Fianna Fail and Fine Gael coalition government is reported in its ‘Programme for Government‘ to have agreed on returning hospitality services back to the 9% reduced rate at the next budget. This likely would be implemented from 1 July 2025.
Affected services include:
- Restaurant, cafe and general catering services; and
- Hairdressing services.
Department of Finance data published last year stated that cutting the VAT rate to 9% for the entire hospitality sector would cost €764 million annually.
Over the COVID period for 3 years, the above services also enjoyed the 9% rate. It returned to the current 13.5% on 31 September 2023. This included hotel & accommodation services.
Sept 2023: Cut from 13.5% to 9% ended after 3 extensions following COVID and inflation crises
After almost three years since the COVID crisis, Ireland has returned its hospitality, hotels and tourism VAT rate to 13%. It was originally cut to 9% in November 2020.
The temporary VAT rate cut was extended three times once inflation rises started to hit the tourism and entertaining industry.
The government had extended the cut in May 2022 for a third time from February 2023 to 31 September 2023.
May 2022 – Effects of cost-of-living crisis prompts second extension of VAT rate cut from 13.5% to 9% to 28th Feb 2023
Ireland’s government has announced on 10 May 2022 a second extension of the reduced VAT rate on restaurant, cafe, catering and tourism services past the planned deadline of 31 August 2022. The new deadline is 28th February 2023. This latest extension will cost Ireland €250 million.
Spiralling inflation replaces COVID-19 economy woes
The last prolongation is due to increased inflation. Ireland’s April 2022 annual inflation rate was 7.3%, up from 6.7% in March.
The cut was originally introduced during the COVID-19 pandemic from 30 November 2020. It was initially to run to 31 December 2021, but it was extending in the October 2021 budget to the current 31 August 2022.
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Ireland had reduced its standard VAT rate from 23% to 21% between September 2020 and the end of February 2021. Ireland had previously reduced its tourism VAT rate from 13.5% to 9% between July 2011 and January 2019 to alleviate the effects of the Euro crisis. The UK, Germany, Austria and many others around the world have cut their tourism and accommodation rates.
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