VAT rate of 9% for hospitality to be extended by six months

The government will extend the reduced VAT rate for the hospitality sector by a further six months, Ireland’s finance minister has announced.

Aschal Donohoe said the 9% rate will remain in place until February 28, 2023.

Mr Donohoe said the move is partly to help companies that receive the in-work wage subsidy scheme, which will be scrapped at the end of May.

The majority of the 4,000 companies still participating in the program are in the hospitality sector, employing a total of 114,000 people, he said.

The reality is that changing VAT over the summer months risks magnifying the cost-of-living challenges many are now facingEaster Donohoe

The cost of living crisis is also playing a role.

Mr Donohoe said it was important to ensure the tourism sector can recover from the pandemic amid concerns of rising inflation hitting businesses.

“The reality is that changing VAT over the summer months risks exacerbating the cost-of-living challenges many are now facing, and also risks increasing the pressure on employers who are just starting out a very, very significant support program,” he said.

The reduced rate costs around 250 million euros.

“This is intended to support the sector, obviously during the busy August period, but critical as they approach November and December, and we know how important it is that they have a good trading period in December,” Mr Donohoe said.

He said the move “lays the groundwork for a really good recovery in a very important part of our economy” and he wants employers “to recognize the importance of sending the message that Ireland is a good value place relationship is vacation in”.

The 9% VAT rate for hospitality was due to expire in August.

We need to get through this time when Covid support is starting to end and hospitality is being hit the hardest by CovidEamon Ryan, Minister for Transport

Green Party leader Eamon Ryan, speaking on his way to Cabinet on Tuesday morning, said the interest rate would not be raised ahead of the “dark winter” – a “difficult” time for hospitality.

“Then we don’t want to change it,” he said.

“So I think it’s timing that will give the hospitality industry the best chance of getting back on its feet.”

The tax rate was reduced from 13.5% on November 1, 2020 to help companies facing financial pressures due to pandemic-related restrictions.

It was extended through August during this year’s budget, although businesses requested another extension to help them recover from lockdown losses.

Adrian Cummins, CEO of the Restaurants Association of Ireland, said: “Since last October’s budget, the Restaurants Association of Ireland has called for this extension as tourism and hospitality businesses, which are among the hardest hit by Covid trade restrictions, continue to recover.

“This decision to extend the rate is to be welcomed at a time when hospitality businesses are facing rising input costs and inflation.”


Public Expenditure Secretary Michael McGrath (Niall Carson/PA)

Public Expenditure Secretary Michael McGrath also confirmed on Tuesday that Cabinet had approved a framework to counteract rising costs in the construction sector.

Mr McGrath said there have been “heavy price hikes” and “restrictions” on the supply of building materials, as well as increased energy costs, which have impacted construction projects.

The minister said this raised concerns about the feasibility of certain projects.

“In the interests of protecting projects already under construction and to mitigate the risk of significant losses” by contractors, Mr McGrath said a collaborative framework for government procurement had been approved. VAT rate of 9% for hospitality to be extended by six months

Fry Electronics Team

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