Hospitality VAT reduction now in effect: What businesses need to know

The Irish hospitality sector has seen a significant change in VAT rates from 1 July 2026, as provided for in the Finance Act 2025. This change is designed to support the industry and will last until 31 December 2030. With the new rates now in effect, businesses should ensure they are fully prepared to comply with the updated VAT requirements.

What’s changing?

From 1 July 2026, the VAT rate for certain goods and services reduced from 13.5% to 9%, covering three key areas:

• Restaurant and catering services
• Supplies of hot food for takeaway (food that has been heated, retained heated after cooking, or supplied while still warm)
• Hairdressing services

Who benefits?

• Catering businesses that provide full-service offerings (serving food on-site, events, functions)
• Hospitality providers such as restaurants and cafes offering dine-in experiences
• Takeaway businesses selling hot food, such as hot sandwiches, soups, curries, or cooked meals
• Hairdressers

Cold takeaway food (such as cold sandwiches) remains at 0% VAT, although confectionery will be subject to the standard 23% rate when supplied for takeaway. Most beverages (such as alcoholic and soft drinks and bottled water) continue to be subject to the 23% rate, regardless of whether supplied as part of a catering or hospitality service or for takeaway, with the exception of tea and coffee which is subject to the 9% rate in all cases.

In the case of combination meals however, where hot food (subject to the 9% rate) is supplied together with a soft drink (subject to the 23% rate), the individual items, and any discount applied, must be apportioned between the individual items and the relevant VAT rates applied.

Defining “catering services”

It’s important to distinguish catering from a simple food delivery.

• Catering services include prepared or unprepared food or beverages provided with sufficient support services for immediate consumption – for example, staff serving the food at events.
• If a company just prepares and delivers food without service, this is a takeaway supply, not catering.

Examples:

• The supply of a sit-down meal in a restaurant falls under catering services and is subject to the 9% rate from 1 July 2026, other than beverages which are generally subject to the 23% rate.
• A firm that sets up and serves food at a corporate event or at a function falls under catering services (subject to 9% VAT from 1 July 2026).
• A takeaway service delivering hot meals without any serving staff remains a supply of hot food, also dropping to 9%.

Why this matters

This VAT reduction offers cost savings for businesses and customers in the hospitality sector and can improve event and catering affordability. However, the correct classification of services is critical to ensure compliance.

Key points to remember

• Effective date: 1 July 2026
• New rate: 9% (previously 13.5%)
• Applies to: Restaurant and catering services, hot food, hairdressing services
• Does not apply to: Cold takeaway food (remains 0%), beverages and confectionery (generally 23%)

Next steps for businesses

• Review your product/service classification to ensure correct VAT treatment
• Update pricing systems, invoices and accounting processes
• As before, ensure to, where necessary, train staff on distinguishing between catering and takeaway services
• Pay particular attention to meal deals and other supplies where a number of different items are being supplied as an apportionment of price may be required

How Crowe can help

Navigating VAT changes can be complex, especially when classification, pricing strategy and compliance obligations intersect. At Crowe, our specialist indirect tax team has deep experience across the hospitality sector and understands the operational challenges these changes present for restaurants, caterers and service providers.

We can assist you by:

• Reviewing your service classifications to ensure compliance with the reduced rate rules
• Advising on system updates and process changes
• Developing practical strategies to manage pricing, margin impact, and cash flow opportunities
• Providing industry-focused insights that reflect the realities of the hospitality market

With Crowe, you gain the reassurance of working with a team that combines technical tax expertise and sector knowledge to help you stay compliant and competitive. Talk to our specialist tax advisors to ensure your business is applying the new VAT rules correctly and making the most of the opportunities they present.