Ireland Extends Application of Reduced VAT Rate on the Tourism and Hospitality Sector

In a press release issued by the Government of Ireland, it was announced that the reduced VAT rate for the hospitality and tourism sector would be extended.

Timeline

The applicable VAT rate in the hospitality and tourism sector will remain at 9% until August 31, 2023. As a result, the VAT rate change from 9% to 13.5% is only effective beginning September 1, 2023, instead of from March 1, 2023.

Impact

The reduced VAT rate currently applied to the hospitality and tourism sector has been extended. As a result, 9% of VAT should be applied until August 31, 2023. After that, the applicable VAT rate will be raised to 13.5%. The VAT rate change concerns tourist accommodations, guesthouses, hotels, and other short-term accommodations.

The intention of the Irish Government was to restore the VAT rate to its original rate of 13.5% from March 1, 2023. However, given the ongoing impact of the high inflation rates and the increasing energy prices, the government has decided to extend the reduced rate until the end of August 2023. With the recent announcement, the government aims to give businesses in the tourism and hospitality sector a significant boost for the coming holiday season.

Companies must be ready to update their systems once the new rates are effective and when the temporary reduction ends.

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