On 21 February 2023, the Irish Minister for Finance, Paschal Donohoe, announced an additional six-month extension for the reduced VAT rate for tourism and hospitality. This final extension hopes to lay the foundation for full economic recovery following the impact of the COVID-19 pandemic and the cost-of-living crisis on the tourism and hospitality sectors.
Ireland's reduced VAT rate continues
Expected to return to 13.5% in March 2023, the recent extension of the 9% VAT rate for hospitality and tourism was met with relief amongst the hospitality industry, believing that this will proactively prevent further price hikes from being passed on to consumers. The latest extension will now be until 31 August 2023. Here's what you need to know about the latest extension and what it means for your business.
The reduced VAT rate was initially announced during the COVID-19 pandemic and took effect on 30 November 2020. The original timeline expected the rate to return to the standard 13.5% by 31 December 2021. However, following the impact of the increasing cost-of-living crisis in Ireland, the Ministry for Finance continuously extended the reduced VAT rate until the current end date (31 August 2023).
Who is impacted by the reduced VAT rate?
The reduced VAT rate impacts mainly tourist accommodations in the tourism and hospitality sector, including guesthouses, hotels and other short-term accommodations. The third extension aims to give the Irish hospitality and tourism sector a much-needed boost in preparation for the upcoming holiday season.
The extension was met with positivity and relief. The Restaurants Association of Ireland (RAI) also welcomed the decision to extend the reduced 9% VAT rate for hospitality for the next six months, with many in the industry saying that this relieved some of the uncertainty of navigating the significant impact felt within the industry.
Additional VAT rate updates
In addition to the reduced VAT rate for hospitality services, there has also been a temporary reduction in VAT on electricity and gas. This reduced rate was due to end on 28 February 2023. However, this reduced rate of 13.5% to 9% has also been extended to the end of October 2023.
Navigate travel and hospitality VAT rates with VAT IT
When it comes to successful VAT recovery, understanding the different VAT rates can be challenging and tricky to navigate - especially if you're an organisation that frequently travels for business. That's why staying up-to-date with the most recent news and changes in rates and legislation is essential. Fortunately, we've got experts to put in your corner to help you find and recover hidden VAT opportunities for your business.
Start your journey towards maximising your return yield on business travel and entertainment by reading our latest blog here.
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