Standard VAT rate to revert to 23% on March 1st 2021
The standard rate of Irish VAT is due to increase to 23% with effect from 1 March 2021. The rate had been reduced to 21% for a six month period from 1 September 2020 to 28 February 2021. The Minister for Finance has recently indicated that he does not intend to extend the reduction and therefore businesses should prepare for the 23% rate applying once more to their supplies and purchases from 1 March 2021 onwards.
The standard rate of VAT applies to broadly 50% of activity in Ireland and to a wide range of goods and services including for example, the sale of motor vehicles, adult clothing, alcohol, non-basic foods stuffs, many e-services, professional services and telecommunications. The temporary reduction in the standard VAT rate was primarily aimed at boosting the retail sector as a result of the COVID-19 pandemic.
It is important to note that this VAT rate change will not impact all supplies. In particular, the targeted VAT rate reduction from 13.5% to 9% for certain goods and services, mainly in the tourism and hospitality sectors, will continue to apply until 31 December 2021.
How does the change impact me?
The breadth of the application of the standard rate means the majority of traders in Ireland will need to consider the impact on their business and changes to systems to implement the revision back to the 23% rate.
You should consider how the change will impact your business and any actions you need to take between now and 1 March to ensure that you are ready for the change.
