In the Irish budget for 2026, a VAT reduction for the hospitality sector was announced. For restaurants/catering and hairdressing services, VAT will be reduced from 13.5% to 9% from July 2026.
The Restaurant’s Association of Ireland has welcomed the news, calling it “a welcome and long-fought victory” for the hospitality industry. The Irish Hotel’s Federation has also welcomed the change in VAT rate, stating “This measure goes a long way toward putting Irish tourism on a more stable footing, aligning Ireland’s VAT rate for hospitality food services with the majority of our European competitors.” (Hospitality Ireland).
While the reduction is a welcome cost-relief for hospitality businesses across the country, the measure won’t kick in until 1st July, due to the ‘significant cost’ it will imply.
This means that for the first six months of 2026, hospitality businesses will have to continue with the 13.5% VAT rate, balancing the cost of this with the rise in minimum wage that will come into effect on January 1st.
The Vintner’s Association of Ireland (VFI) has criticised this decision, saying that it ‘fails to deliver‘ for many pubs and bars already struggling across Ireland. While the reduction in VAT rate came as welcome news for the VFI, they have called the delay ‘unacceptable’, as pubs and restaurants will have to deal will 6 months of additional costs while waiting for the measure to kick in.
The Budget was announced in October of this year, two months after a survey of Dublin’s food pubs revealed that 42% of these businesses planned to cut staff if the VAT reduction was delayed until 2026.
With this reduction still now 8 months away, it is unclear how hospitality businesses will fare financially while waiting for the reduction to kick in.
