John Paul O'Shea (Cork North-West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

278. To ask the Minister for Finance to outline the implementation processes around the VAT reductions for the hospitality sector which is to come into place on 1 July 2026; and if he will make a statement on the matter. [40910/26]

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

With effect from 1 July 2026, restaurant and catering services which are currently subject to the 13.5% reduced VAT rate will move to the second reduced VAT rate of 9%. This includes meals served in hotels, guesthouses, B&Bs and other similar establishments. This VAT rate change was legislated for in Finance Bill 2025. Supplies of alcohol, bottled waters, soft drinks, sports drinks and vegetable juices (excluding fruit juice) are not included in the change and will remain liable to VAT at the standard rate even when provided as part of a restaurant or catering service.

The 13.5% VAT rate continues to apply to the supply of accommodation in hotels, guesthouses, and similar establishments, including in the B&B sector.

In practical terms, this means that, where a single charge is made for a package comprising both meals and accommodation, the charge must be apportioned for VAT purposes between the elements taxable at 9% and at 13.5%, in addition to any elements that are chargeable at the standard rate. So, where an accommodation provider charges a single price covering both the overnight stay and breakfast, that total must be apportioned for VAT purposes, with the breakfast element taxable at 9% and the accommodation element at 13.5%. The apportionment should be made on a fair and reasonable basis, having regard to the selling prices of each component if sold separately.

VAT operates on a self-assessment basis and therefore the application of VAT on services is primarily a matter for the company or person who is accountable for the VAT. In line with its focus on providing a service to support taxpayer compliance, Revenue provides extensive guidance in relation to VAT on services on its website www.revenue.ie and in the form of various Tax and Duty Manuals. Revenue will also provide specific advice or guidance to taxpayers that seek VAT advice on services through contact with the relevant Revenue branch or through its Revenue Technical Service. To further support compliance specifically in relation to this VAT reduction, Revenue published updated guidance in April which explains, with the use of practical examples, how the VAT rates apply for Restaurant and catering services and for Guest and holiday accommodation providers. The Tax and Duty Manual on the VAT Treatment of Restaurant and Catering services and for Guest and holiday accommodation can be accessed on the Revenue website:

www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Services/services-vat-treatment-of-restaurant-and-catering-services.pdf and

www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Services/services-guest-and-holiday-accommodation.pdf

There is also existing guidance which explains the procedures to be followed by VAT registered traders when increases or reductions in VAT rates take place:

www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part06-rates-and-exemptions/changes-in-rates-of-vat/changes-in-rates-of-vat.pdf