Irelands 9% reduced VAT rate on Restaurant, Catering and Hairdresser Services: How you can Prepare!
From the 1st July 2026, the Irish Government will introduce a 9% reduced VAT rate for certain restaurant, catering and hairdresser services to help tackle rising costs and support businesses in these industries. This replaces the previous 13.5% reduced VAT rate for the applicable services.
Challenges Facing Businesses
Whilst this VAT rate cut provides much needed support for these sectors, in practice it can also lead to significant VAT complications for businesses. For example, identifying and correctly accounting for the correct VAT rate for each service provided and using the correct VAT rate in the case of mixed supplies made up of a combination of services which are subject to different VAT rates in Ireland, such as:
- an overnight stay (accommodation VAT rate of 13.5%) and dinner (reduced VAT rate of 9%) are supplied are part of a combined package.
- a meal (reduced VAT rate of 9%) served alongside certain alcoholic drinks (standard VAT rate of 23%) are provided as part of a combined deal.
- a hairdresser provides a service subject to the 9% reduced VAT rate as part of a package including hair care products which are outside the scope of the 9% reduced VAT rate.
Ensuring that these combined supplies remain VAT compliant can prove extremely difficult for businesses without the right systems in place. To make these scenarios more concerning, incorrect VAT treatments can expose businesses to underpaid VAT assessments, interest and penalties!
To help avoid this, businesses should carefully assess:
- any upcoming VAT rate changes which may affect their supplies.
- whether the supplies constitute a single supply or multiple separate supplies.
- in the case of bundled supplies, that the supply is treated correctly from a VAT perspective.
- whether it may be beneficial to implement an automated VAT determination solution within their ERP system to ensure VAT compliance
Forward-Facing, Reliable Solutions
Therefore, it is vital that businesses understand how supplies are structured from a VAT perspective to ensure they subject to the correct VAT rate and remain compliant.
The strongest solution is to ensure your business has strong, robust and clear systems in place, such as an automated VAT determination solution within your ERP system, to ensure that your businesses supplies are treated accurately and consistently from a VAT perspective. This is where the assistance of experienced VAT specialists can provide much needed guidance to ensure your business remains on top of ever-evolving VAT developments.
Here at Meridian, we have extensive experience in supporting businesses with implementing automated VAT determination solutions within their ERP systems and providing tailored advice to ensure compliance with supplies of restaurant, catering, hairdresser and ancillary services with ever-evolving VAT regulations.
With the right VAT determination in place, businesses can sit back, relax and enjoy the benefits of VAT rate cuts without the stress!
If you require any assistance in understanding the correct VAT treatment of services or would like further information in regard to our automated VAT determination solutions, please feel free to reach out to us and we would be delighted to help!