Finance Bill 2025 contains several measures in relation to VAT and other indirect taxes across various sectors. A number of these provide a legislative basis for measures already announced in the Budget, whereas others introduce changes or clarifications to existing legislation including administrative points in relation to VAT registrations.
These measures are summarised below.
In his Budget 2026 speech, the then Minister for Finance, Pascal Donohue announced the introduction of a 9% VAT rate for the supply of an apartment in an apartment block, as that term is defined in stamp duty legislation, with effect from 8 October 2025 until 31 December 2030. That measure took effect by way of Financial Resolution passed on Budget night.
There have, since then, been further amendments to the scope of the 9% rate for apartments and a further Financial Resolution to give effect to these amendments was passed on 26 November 2025. The relevant provisions of Finance Act 2025 are expected to mirror the wording of the most recent Financial Resolution.
Consequently, in the period from 26 November 2025 until 31 December 2030, the 9% VAT rate applies to the supply of immovable goods (i.e. land and buildings) that are or, when completed, will be:
The Financial Resolution dated 26 November 2025 also extended the 9% VAT rate to “services consisting of the development, until completed” of apartments or apartment blocks that fall within the above provisions.
A specific definition of an “apartment block” was also introduced into the VAT law which is similar to that within stamp duty legislation (but no longer cross refers to the stamp duty legislation).
Consequently, following the 26 November amendments, the 9% rate should also apply to arrangements involving the sale of a site on which apartments in an apartment block will be developed as well as the development until completion of those apartments, such as under forward funding arrangements (subject to the exclusions of any areas not used or to be used for residential purposes).
The Bill contains measures which, upon the date of passing of the Finance Act, bring the VAT waiver of exemption (‘waiver’) regime for property lettings to an end.
The waiver regime applies where a landlord elected, prior to 1 July 2008, to charge VAT on their lettings of property for a term of 10 years or less and the waiver regime continued to apply to such lettings after 1 July 2008 but only in respect of property acquired or developed before that date.
The rules also provided that if and when the waiver was subsequently cancelled, the landlord was liable to pay to Revenue an amount equal to the excess of any VAT reclaimed over VAT paid in respect of all properties which were subject to the waiver.
However, a taxpayer’s obligation to make this cancellation payment was successfully challenged based on EU VAT principles in the Irish High Court judgment in the Killarney Consortium versus The Revenue Commissioners case which was delivered in December 2024.
Following this judgment, Revenue issued an updated Tax & Duty Manual on 23 June 2025 confirming that, with effect from 20 December 2024, Revenue will no longer seek to collect a cancellation payment when a waiver is cancelled.
The Bill contains measures which will result in all remaining waivers being automatically cancelled on the date of passing of the Finance Act and no amount being payable to Revenue in respect of that cancellation.
This will mean that any lettings which are currently subject to VAT as a result of a waiver of exemption applying will default to becoming VAT exempt lettings when the Finance Act is passed, unless the landlord has exercised the landlord’s option to tax in accordance with the rules in place since 1 July 2008.
It should also be noted that it is not possible to exercise a landlord’s option to tax in some cases, including residential lettings and lettings where the tenant (or any other occupant of the let property) is connected to the landlord and has less than 90% VAT recovery entitlement.
This could have an impact on the VAT recovery position of landlords in cases where lettings which were previously taxable because of a waiver become exempt. Therefore, landlords who continue to have a waiver of exemption should review the VAT treatment of their lettings in order to assess the impact.
As announced in the Budget, the temporary VAT rate of 9% for supplies of gas and electricity will continue to apply up to and including 31 December 2030. The rate for these supplies had been due to revert to 13.5% from 1 November 2025.
As also announced in the Budget, the VAT rate for restaurant and catering services, as well as hairdressing services, will reduce from the 13.5% rate to the 9% rate with effect from 1 July 2026.
The VAT rate cut will apply to most food and certain drinks sold in a restaurant, café, hotel, bar, takeaway or other catering environment. However, exceptions will remain, such as sales of soft drinks and alcoholic drinks which remain subject to the standard 23% VAT rate.
Unlike in prior periods, the reduction in the VAT rate from 13.5% to 9% will not extend to hotel or short-term rental accommodation services or admissions to tourist attractions. The change in VAT rate will also introduce some complexity for businesses that sell combined services, which partly qualify for the 9% rate. For example, a combined bed and breakfast rate may now need to be split between the accommodation and food elements.
Currently, the reduced 13.5% VAT rate applies to the letting of immovable goods “where those goods consist of a room in a hotel or guesthouse” and this is generally interpreted as extending to meeting rooms and other facilities within a hotel and guesthouse.
However, the Bill updates this provision to limit the reduced 13.5% rate to the provision of holiday or guest accommodation in a hotel, guesthouse or other similar establishment with effect from 1 January 2026.
The Bill extends the VAT exemption for financial services concerning the management of certain specified investment funds to include the management of the Automatic Enrolment Retirement Savings System, as provided for under the automatic enrolment rules for employees that will be introduced on 1 January 2026.
The flat-rate addition payable to flat-rate farmers will decrease from 5.1% to 4.5% with effect from 1 January 2026. The flat-rate addition compensates farmers, as defined for VAT purposes, who are not obliged to register for VAT and who have not elected to do so.
In addition, the Bill contains technical updates to the rules for assessing when a farmer is required to register for VAT (for example, if he or she is in receipt of income from non-farming activities which exceeds the relevant VAT registration threshold).
Whereas current legislation requires an assessment of the farmer’s income over any continuous 12-month period, the Bill proposes to change that to assessment over both the current and previous calendar year. This measure would take effect from 1 January 2026.
The Bill contains various technical measures in relation to various forms of excise duties, including:
The measures unveiled in Finance Bill 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 David Duffy of our Tax team today.
