Finance Bill 2025: Indirect Taxes

Finance Bill 2025 introduces a number of changes to VAT and other indirect taxes across several sectors. Our Tax team considers some of the key measures.

9% VAT rate for apartment sales

The VAT rate applicable on the sale of new apartments has been reduced from 13.5% to 9% effective from 8 October 2025. This is a significant measure designed to reduce the cost of apartments and increase the supply of new apartments.

Read our Finance Bill 2025: Built Environment insight for further detail on this change.

End of the property letting “Waiver of Exemption” regime

The Bill confirms that the long-standing waiver of exemption regime for property lettings will be brought to an end when the Finance Act 2025 is enacted.

Under the historic rules, landlords who elected before 1 July 2008 to charge VAT on certain lettings could continue to apply the waiver regime after that date. Where a waiver was later cancelled, the landlord was required to pay Revenue a cancellation amount equal to any excess VAT reclaimed over VAT paid on properties subject to the waiver. However, following the High Court’s 2024 judgement in the case Killarney Consortium v The Revenue Commissioners, Revenue updated its published guidance to confirm that, with effect from 20 December 2024, they will no longer collect the payment of a cancellation amount.

The Bill now formally cancels all remaining waivers automatically on enactment of the Finance Act, and no repayment will be due to Revenue. Once this occurs, any letting currently subject to VAT solely because of a waiver will automatically become VAT-exempt, unless the landlord has opted to tax under the post-2008 rules.

It is important to note that an option to tax cannot be exercised for residential lettings or lettings where the tenant or another occupant is connected to the landlord and has less than 90% VAT recovery entitlement.

This change may impact the VAT recovery position of landlords, particularly those with mixed-use portfolios. Landlords should review their property portfolio to identify lettings still covered by a waiver and assess whether input VAT recovery could be restricted when the automatic cancellation takes effect, and whether to opt to tax the letting, if permitted.

VAT rate for electricity and natural gas

The Bill extends the current temporary 9% VAT rate on supplies of electricity and natural gas until 31 December 2030. Without this amendment, the rate would have reverted to 13.5% from 1 November 2025.

The measure provides greater price certainty for households and businesses as Ireland continues its transition to renewable energy sources.

VAT rate for food, hospitality and hairdressing

The Bill confirms that from 1 July 2026, the VAT rate on restaurant, catering, and hairdressing services will reduce from 13.5% to 9%.

The reduced rate will apply to most food and non-alcoholic drink sales in restaurants, cafés, hotels, bars, and takeaways. However, alcoholic beverages and soft drinks will remain subject to the standard 23% rate.

The reduction in the rate does not extend to hotel accommodation, short-term lettings, or tourist attraction admissions.

For businesses providing combined offerings, including bed-and-breakfast packages or meal-inclusive stays, this change will likely add compliance complexity in identifying the elements of the charges that are subject to different VAT rates.

VAT rate for hotel and guesthouse room hire for non-accommodation use

From 1 January 2026, the hire of rooms in hotels or guesthouses for non-accommodation purposes, or example, meetings, conferences or events, will be subject to VAT at the standard rate of 23%.

This change aligns the VAT treatment of these types of facilities with that of other event and conference venues and should ensure consistency in VAT treatment for these services across the sector.

VAT exemption for management of pension funds

The Bill extends the existing VAT exemption for financial services relating to fund management services to include the management of the new Auto-Enrolment Retirement Savings System due to launch on 1 January 2026.

This ensures the VAT treatment of the management of these AERSS funds will be in line with the treatment of management services provided to defined contribution pension schemes and certain other funds.

Excise duties

The Bill introduces a number of measures relating to excise duties, including:

• The scope of the Natural Gas Carbon Tax and Solid Fuel Carbon Tax reliefs for electricity generation has been narrowed, reflecting the Government’s climate policy objectives and incentivising cleaner energy production. These changes are effective from 8 October 2025
• Vehicle Registration Tax relief for electric vehicles is being extended by one year to 31 December 2026

Betting duty

The Bill introduces a number of technical changes to the Finance Act 2002 to align with the Gambling Regulation Act 2024. Some of these include:

• Inserting new and revised terms to account for the changes to the licensing framework brought about by the Gambling Regulation Act 2024
• Confirming that remote betting duty falls due at the time that a bet is entered into by a bookmaker
• Clarifying the return filing and payment deadlines for any person liable to pay betting duty, remote betting duty or a betting intermediary duty, being the 15th day following the end of the relevant accounting period
• Clarifying that remote betting duty must be discharged by the bookmaker and cannot be passed on to the consumer, and
• Extending Revenue's power to enter into arrangements and take security from specified taxpayers via betting intermediaries

Affected businesses should consider the potential impact of these provisions on the operation of betting duties.

Other Finance Bill 2025 insights

The content of this article is provided for information purposes only and does not constitute legal or other advice.