The standard rate of VAT in Ireland will be reduced from 23% to 21% for a six-month period from 1 September 2020 to 28 February 2021. The measure has been introduced as one of the measures to restart the Irish economy following the shutdown brought about by the Covid-19 pandemic.

This is the first change to the top end rate of VAT in Ireland since 2012 when the rate was changed from 21% to 23%.

The aim of the reduction is to incentivise expenditure in the economy.  However, businesses need to be mindful of a range of issues before the temporary reduction comes into force in September.

We have identified six areas that businesses will need to consider before the reduction kicks in:

  • Pricing: Do you need to reprice items that are subject to the higher rate of VAT?
  • IT & Related Systems: Can you make the related changes on your EPOS, or related, system easily prior to the temporary change?
  • Contracts: Are your existing contracts written with VAT inclusive or VAT exclusive pricing? You might need to engage with suppliers on this issue.
  • Timing: How do you quantify your VAt liability when dealing with transactions that span the period of time that encompasses two VAT rates (23% and 21%).  
  • Direct Debits: You should consider this area as you might have direct debits that need to be adjusted.
  • Credit Notes: What should you do if an item was purchased from you at 23% VAT and the customer seeks a credit note during the period when the lower rate applies?

Contact Us

These difficult issues are all questions that we are currently dealing with for client companies.  Contact us on 052 61 37775 if we can be of assistance or email Áine Kiely O’Donnell on: [email protected] for an initial chat about the issue.