The Irish Government has announced a change to Irish VAT rate under the July Jobs Stimulus Package, a set of measures designed to support businesses.
As part of these measures, there will be a six-month reduction in the standard rate of VAT from 23% to 21%, from 1 September 2020 to 28 February 2021.
Businesses need to move quickly to ensure their systems are capable of applying the VAT rate reduction.
In concrete terms, there will be a six month reduction in the standard rate of VAT, from 23 per cent to 21 per cent, becoming effective from the beginning of September 2020 and lasting till February 2021.
No change was announced to the reduced 13.5% VAT rate.
The standard rate of VAT applies to broadly 50% of activity in Ireland and to a wide range of goods and services including for example, the sale of motor vehicles, adult clothing, alcohol, non-basic foods stuffs, many e-services and professional services.
The measure is expected to provide a boost to the B2C sector with the potential for price decreases to stimulate demand, but it is important to note the VAT rate change will not impact all supplies.
The change will not impact the VAT treatment of most sales in the hospitality and tourism sector. For example, the VAT rate for restaurant meals or hotel accommodation which remain subject to the reduced VAT rate of 13.5%.