Luke Prendergast
Partner, BFCD, Ireland
Ireland Budget 2026; VAT reduction for hospitality and food services
October 20, 2025
Ireland Budget 2026; overview
On 7 October 2025, the Irish Minister of Finance announced details of the Ireland Budget 2026. One of the main tax changes introduced was a reduction in the VAT rate for the Hospitality Sector. Ireland has two main VAT rates – the 23% Standard Rate and the13.5% Reduced Rate. The reduction will see a third rate of 9% apply to food and catering services, as well as hairdressing services. The measure will take effect from 1 July 2026.
Why the VAT reduction was introduced
The rationale behind the reduction was to provide support to the hospitality sector, which is a large employer in the Irish economy, but is a sector under significant cost pressure from the increasing minimum wage, high food prices and energy costs. The 9% rate does not apply to hotel or short-term rental accommodation; therefore, businesses offering combined packages such as “bed and breakfast” will have to separate the VAT for the accommodation and food elements.
VAT change for new apartments
Another similar VAT measure was also announced to incentivise the construction of apartments, whereby the VAT rate on the sale of new apartments was also reduced from 13.5% to 9%. This change is effective immediately from 8 October 2025.
Reaction and economic context
The VAT reductions are quite controversial because the projected cost of the measures represented almost half of the total tax reduction package in the Budget and left no room for wider cuts to the income tax base. However, it does reflect the current Irish Government’s pro-business approach to the economy.
Contact for further information
If you would like more information about this topic or indeed any VAT or indirect taxes issue for Ireland, you can get in touch with any of the team at BFCD Chartered Accountants – the Kreston Global member firm in Ireland.
