Finance (No. 2) Bill 2026: indirect tax changes

Finance (No. 2) Bill 2026 contains a range of measures affecting VAT and excise duties.

Some measures provide the legislative basis for changes announced in the Budget, while others amend or clarify existing rules.

For businesses, the most significant development is the well flagged reforms to modernise VAT and introduce mandatory electronic invoicing and digital VAT reporting in Ireland beginning 1 November 2028.

These reforms focus on VAT invoicing and reporting requirements but will affect organisations well beyond the tax function. Finance, procurement, sales, technology, and compliance teams will need to understand the timetable, assess data and systems, and establish clear ownership for implementation.

Alongside this wider transformation, the Bill includes targeted measures for financial services, vaccines for livestock, flat-rate farmers and several excise categories.

Glenn Reynolds

Partner, Head of Indirect Tax - VAT & Customs

KPMG in Ireland

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VAT modernisation moves into legislation

Finance (No. 2) Bill 2026 marks the next step in the most significant overhaul of Irish VAT administration and reporting since VAT was introduced in 1972.

The Bill includes measures giving effect to Revenue’s VAT modernisation programme, which is intended to increase transparency, improve reporting accuracy and modernise VAT collection processes.

Revenue’s VAT modernisation programme represents a substantial change in the administration of VAT in Ireland. Under the current timetable every business established in Ireland must be capable of receiving electronic invoices from 1 November 2028. Requirements to issue electronic invoices and digitally report transactions will then be introduced in phases.

Phased implementation timetable for issuing electronic invoices

Phase	Date	Requirement
Phase one	1 November 2028	VAT-registered businesses designated as ‘large corporates’ by Revenue must issue electronic invoices and report domestic business-to-business transactions in close to real time.
Phase two	1 November 2029	The domestic electronic invoicing and reporting requirements extend to all VAT-registered businesses engaged in cross-border EU business-to-business trade.
Phase three	1 July 2030	EU-wide electronic invoicing and digital reporting become mandatory for cross-border EU business-to-business transactions. Irish businesses operating under the domestic regime must align with the EU requirements.

The timetable creates different obligations for different business populations, but the practical challenge is common: invoice data must be created, validated, transmitted and stored in a form that supports the new requirements.

Businesses with multiple enterprise resource planning systems, manual processes or complex transaction flows may face a more extensive change and transformation programme than businesses which are familiar with and already operating electronic invoicing models in other jurisdictions, or which operate more streamlined less complex finance systems and business models.

What businesses should do now

Although the first commencement date is more than two years away, implementation should not be treated as a tax-only compliance project that can be addressed shortly before the ‘go-live’ date.

Technology selection and deployment can require significant lead time, particularly where a business must coordinate several legal entities, systems, suppliers, and customers.

Over the next six months, organisations should prioritise four actions:

Confirm the implementation timetable and identify which phase applies to each business or VAT registration.
Review the expected data requirements and identify gaps in invoice, customer, supplier, and transaction information.
Assess the affected businesses, transactions, systems, customers, suppliers, and internal teams.
Create a delivery roadmap covering timelines, workstreams, stakeholders, dependencies and project ownership.

In short, businesses should now assess how the electronic invoicing timetable applies to them, map affected transactions and systems and develop a cross-functional implementation plan.

Early preparation should enable businesses to develop a scalable approach, reducing the risk of duplicated investment as electronic invoicing requirements are introduced across other jurisdictions.

Targeted VAT measures

Financial services

The Bill proposes amendments to paragraph 6(1)(c) of Schedule 1 to the VAT Act, which addresses certain VAT-exempt financial services, in particular, the VAT exemption for payments and the operation of current, deposit or savings accounts.

The stated intention is to align the Irish wording more closely with that of the EU VAT Directive from 1 January 2027.

Revenue has indicated that the amendment is not expected to change current practice. Financial services businesses should nevertheless review the revised wording and any related guidance to confirm that established treatments remain appropriate.

Livestock vaccines

As announced in the Budget, the Bill applies the 9% VAT rate to supplies of non-oral vaccines used to prevent respiratory illnesses in livestock from 1 January 2027.

Businesses in the relevant supply chain should confirm the products within scope and ensure that invoicing and tax coding reflect the new treatment when it takes effect.

Flat-rate farmers

The flat-rate addition payable to flat-rate farmers will increase from 4.5% to 4.8% from 1 January 2027. The addition compensates farmers, as defined for VAT purposes, who are not required to register for VAT and have not elected to do so.

Excise duties and vehicle registration tax

The Bill also confirms several measures across excise duties and vehicle registration tax (VRT):

Tobacco Products Tax on a packet of 20 cigarettes increases by €1, including VAT, with a proportionate increase for other tobacco products, effective from midnight on Budget Day.
E-Liquid Products Tax on e-cigarettes and vaping products increases to €700 per litre, from 1 January 2027.
Insertion of clarifying provisions in Finance Act 2002 in relation to the operation of betting duties. Those relevant to the Gambling Regulation Act 2024 include a targeted 25% betting duty applicable to commissions earned from certain pool bets from 1 January 2027.
The VRT rate for certain higher-emission vehicles increases from 1 January 2027.
VRT relief for certain electric vehicles is extended to 31 December 2028.

Get in touch

The measures unveiled in Finance (No.2) Bill 2026 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 Glenn Reynolds of our Tax team today.