VAT
Registration thresholds
A package of EU-wide measures aimed at simplifying VAT compliance for small and medium enterprises is due to take effect from 1 January 2025 onwards. This package includes allowing EU Member States to set their VAT registration thresholds at a turnover value of up to €85,000 per annum.
The minister announced that businesses established in Ireland will benefit from the maximum permitted relaxation by increasing the VAT registration threshold from €80,000 to €85,000 for businesses principally engaged in supplies of goods. The turnover threshold for businesses principally engaged in supplies of services is to increase from €40,000 to €42,500.
It is important to note that there continues to be a “nil” turnover threshold for (i) businesses in receipt of taxable services from abroad on which they are subject to reverse charge VAT and (ii) non-Irish established traders who make taxable supplies of goods or services on which they are obliged to account for Irish VAT.
Gas and electricity
The minister confirmed that the temporary VAT rate of 9% for supplies of gas and electricity will be extended for a further 6-month period, up to and including 30 April 2025. This temporary rate came into effect on 1 May 2022 in response to the significant increases in the price of these utilities and has previously been extended on several occasions. The VAT rate for these supplies is now due to revert to 13.5% on 1 May 2025.
Heat pumps
The VAT rate applicable to the supply and installation of heat pumps will be reduced from the standard 23% rate to the reduced 9% rate with effect from 1 January 2025. This change is intended to encourage further retrofitting of heat pumps in line with the National Retrofit Plan.
Carbon tax
The carbon tax rate for petrol and diesel per tonne of carbon dioxide emitted will increase by €7.50 from €56 to €63.50 from 9 October 2024 based on the trajectory for annual increases set out in Finance Act 2020. For other fuels, the carbon tax rate increase will take effect from 1 May 2025.
Excise duties
Tobacco products
The excise duty on a packet of 20 cigarettes will increase by €1 (inclusive of VAT), with a pro-rata increase on other tobacco products. This measure will take effect from midnight on 1 October 2024 and will bring the price of a pack of 20 cigarettes in the most popular price category to €18.05.
E-cigarettes / vapes
As earmarked in Budget 2024, the minister also announced the introduction of a new domestic tax on e-cigarettes / vapes. This tax will apply to all e-liquids at a rate of 50c per millilitre of e-liquid and will increase the price of a typical disposable vape product from €8 to €9.23 including VAT. Implementation of this new domestic tax will not occur until the middle of 2025 and is subject to ministerial commencement order.
Alcoholic products
There were no increases in excise duty on alcohol products.
The minister confirmed that the excise relief programme already available to small independent producers of beer, cider and perry (reducing excise duty payable by up to 50% within prescribed limits) is extended to other fermented beverages such as mead and wines other than grape wine (e.g. elderberry wine and strawberry wine), as well as to higher-strength cider and perry.
Vehicle registration tax
The minister announced an amendment to the Vehicle Registration Tax (VRT) weight ratio applicable to battery electric commercial (BEV) vehicles so that they can qualify for the €200 VRT rate available for their fossil-fuelled counterparts. These BEVs currently do not qualify due to the battery weight, which puts them at a competitive disadvantage.
The minister also announced a new emissions-based approach to VRT for Category B commercial vehicles. Under the new approach, a reduced 8% VRT rate will be payable for category B vehicles with CO2 emissions of less than 120g per kilometre. The minister did not specify the commencement date for the above measures.
Customs duty
There were no customs duty changes announced in the Budget.
Get in touch
The measures unveiled in Budget 2025 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.
Contact any member of our Tax team today.
Tom Woods
Partner, Head of Tax
KPMG in Ireland
Brian Brennan
Partner
KPMG in Ireland