VAT Rate for the hospitality sector will increase to 13.5%

VAT Rate Changes Effective 1st September 2023

What’s Changing?

As of 1st September 2023, the Irish VAT rate for specific goods and services, predominantly in the tourism and hospitality sectors, will be revised from 9% to 13.5%. Our VAT specialists, Glenn Reynolds and David Duffy are here to elucidate these modifications.

The scope of this VAT adjustment involves selected food and beverage offerings at restaurants, takeaway outlets, and other culinary services; entrance fees to various attractions such as cinemas, museums, and exhibitions; lodging services at hotels and guesthouses; as well as hairdressing services.

Initially introduced on 1st November 2020 to mitigate the impact of the COVID-19 crisis on these sectors, the 9% VAT rate was prolonged several times. However, the Government has indicated that there will be no more extensions beyond 31st August 2023.

Note that supplies of certain printed materials, including magazines and periodicals, as well as the provision of sporting facilities by for-profit entities that also qualify for the 9% rate, will remain unaffected. Likewise, goods and services subject to other VAT rates are not impacted by this change.

How Will This Impact Businesses?

Businesses offering the aforementioned goods and services must adjust their systems to charge the new 13.5% VAT rate, effective 1st September 2023. While the VAT dues for the September/October 2023 period won’t be payable to Revenue until 23rd November, businesses should act now to ensure full compliance and commercial readiness.

Below is a checklist of essential considerations:

Systems:

Update your various business systems to reflect the new VAT rate. Depending on your existing infrastructure, this could range from straightforward adjustments to more intricate tax code and logic updates.

Pricing:

Assess how the VAT rate alteration will impact your pricing strategy. Given that many affected goods and services are non-deductible supplies, the revised VAT will translate to a net cost for numerous customers.

Timing:

The VAT “tax point” for each supply needs to be clearly identified to apply the correct rate.

Contracts:

Review existing contracts for future transactions to ascertain whether the pricing terms are VAT-exclusive or inclusive.

Mixed Supplies:

In instances where the goods and services are part of bundled offers, businesses may need to re-calculate blended VAT rates.

Credit Notes:

Post-change, you might have to issue credit notes for invoices that were generated prior, requiring your systems to still accommodate the 9% rate.

Warehoused VAT Debts:

Businesses that participated in the COVID-19 debt warehousing scheme must ensure they apply the correct VAT rate to meet ongoing payment obligations.

For any queries related to these changes, don’t hesitate to get in touch with us here at Beresford McArdle. We’re committed to providing you with timely advice and practical solutions.