Minister Donohoe announces Tourism and Hospitality VAT Rate to move to 9% on Sunday
The Minister for Finance, Paschal Donohoe T.D., is pleased to announce that, in line with his announcement in Budget 2021, the VAT Rate for the tourism and hospitality sector will drop from 13.5% to 9% from Sunday, 1 November.
This rate reduction will apply to catering and restaurant services, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, and hairdressing. This change will apply from 1 November 2020 to 31 December 2021.
Speaking in advance of the change the Minister Donohoe said:
‘I introduced this change in recognition of the unprecedented challenges facing particular sectors of the economy. The reason I chose a start date of 1 November was to introduce this measure at the earliest possible moment to allow those businesses that are currently open to benefit’.
“I understand that many businesses remain closed for now and those that are open are operating at significantly reduced capacity. I am putting this reduced rate in place until December 2021 in order to provide significant additional support to businesses throughout 2021 when hopefully our economy and society can start to return to some form of normality.
“This measure represents targeted, timely and temporary support to those areas of the economy most deeply impacted by the public health restrictions. Based on 2017 figures of the number of VAT traders in 9% sectors, the measure has the potential to benefit approximately 14,600 businesses. When we look specific sectors most seriously impacted by the pandemic and the health restrictions, employment in the accommodation and food services sector fell from 181,000 in Q2 2019 to 128,000 in Q2 2020. However, there were approximately 122,000 workers in this sector claiming the PUP in June. While PUP claims decreased from 122,000 to 90,000 by mid-October, the impact of the pandemic remains considerable.
“The introduction of a 9% VAT Rate for the tourism and hospitality sectors alongside other measures such as the Employment Wage Subsidy Scheme and the Covid Restrictions Support Scheme forms an important part of the Government’s economic response to the pandemic.”
With effect from 1 November 2020, Hospitality and Tourism related services and goods currently applying at the Reduced Rate of 13.5%, will be reduced, on a temporary basis, to the second reduced VAT rate of 9%. This includes catering and restaurant supplies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, and hairdressing. This change will apply from 1 November 2020 to 31 December 2021.
This measure will cost the Exchequer €336 million in 2021 and €401 million in total.