The headline: food is cheaper to sell, not everything else
From 1 July 2026, VAT on restaurant and catering services, hot takeaway food, and hairdressing in Ireland fell from 13.5% to 9%. It's the return of a rate hospitality lobbied hard for ever since it was withdrawn in 2023 — but it is narrower than the COVID-era version many operators remember, and the gaps matter. Get the scope wrong on your till and you're either overcharging VAT on food that now qualifies for the lower rate, or undercharging it on drinks and accommodation that don't.
That last group of exclusions catches people out. A restaurant bill with a main course, a soft drink and a glass of wine on it isn't a single VAT rate any more — it's three line items at three different rates, on the same table, on the same receipt.
How Ireland got here: a five-year round trip
This isn't the first time hospitality has had a 9% rate — it's the second. The road between the two tells you most of what you need to know about why this one is more durable.
The narrower scope this time is deliberate. Splitting food from accommodation let the government offer relief to restaurants and cafés — the part of the sector making the loudest case about margin pressure — without extending the same discount to the hotel sector's room rates.
The part that actually catches operators out: mixed supplies
If you only sell food, or you only sell rooms, the rate change is simple. Most hospitality businesses aren't that clean. A hotel selling bed and breakfast, a golf club with a clubhouse restaurant, a venue billing a wedding package that includes a room hire and a meal — all of these now need to split a single transaction across two VAT rates rather than applying one blanket rate to the whole thing.
Where accommodation and food are sold together as a package — the classic example is bed and breakfast — Revenue expects the price to be fairly apportioned between the 13.5% accommodation element and the 9% food element. Charging the whole package at one rate, in either direction, is a compliance risk, not a rounding error.
This is exactly the kind of thing a till system either handles cleanly or turns into a manual headache. An EPOS that assigns VAT at the individual item or category level — food, drink, accommodation, treated as genuinely separate things rather than one setting for the whole business — apportions correctly by default. One that only supports a single site-wide VAT rate forces staff to calculate the split by hand, on every bundled sale, every time.
What a compliant setup actually looks like
| Item type | VAT rate | Common mistake |
|---|---|---|
| Food (dine-in, takeaway, hot) | 9% | Left at 13.5% because the till wasn't updated for 1 July |
| Alcoholic drinks | 23% | Accidentally dropped to 9% alongside the food menu |
| Soft drinks, water, sports drinks | 23% | Grouped with food items in the menu category, inheriting 9% |
| Room / accommodation only | 13.5% | Unaffected — the risk here is leaving it unchanged when it was already correct |
| Bundled B&B package | Split 13.5% / 9% | Charged as a single rate across the whole package |
| Hairdressing services | 9% | Missed because it's not usually grouped with "hospitality" categories |
Why this is still contested, months after it landed
The 9% rate cleared parliament and took effect, but the argument over whether it was the right call hasn't gone away. The case for it, made loudest by the Restaurants Association of Ireland, pointed to real closures — the RAI cited more than 300 food service businesses shutting in the first seven months of 2025 alone, blaming rising minimum wage costs, mandatory pension contributions and general cost pressure.
The case against it is about targeting, not principle. The measure costs the exchequer an estimated €681 million a year, and it applies the same 4.5-point cut to a large multinational chain as it does to a single-site independent café. Opposition parties singled out companies like McDonald's and Starbucks as beneficiaries of a relief designed to save small operators, and economists have questioned whether the scale of the cost is justified by the evidence for "mass closures" beyond what's normal in a competitive sector.
"The return of the 9% VAT rate is a welcome and long-fought victory for our industry. It will play a key role in safeguarding jobs, supporting SMEs, and maintaining Ireland's global reputation for hospitality and food tourism."
— Adrian Cummins, CEO, Restaurants Association of Ireland
There's also a live question about who actually benefits. Ireland's Tánaiste, Simon Harris, was reported as saying businesses benefiting from the lower rate aren't expected to pass the saving on to customers through lower menu prices — meaning the primary intended effect is margin relief for operators, not cheaper meals for diners. Whether that plays out that way in practice, or whether competitive pressure pushes some of it back into pricing, is something operators are actively deciding for themselves right now.
What to actually do about it
HDS Cloud Apps assigns VAT at the item and category level as standard, so food, drink and accommodation are genuinely separate settings rather than one rate applied across the whole business. Bundled packages split correctly at the point of sale, and reporting reflects each rate separately — built for exactly this kind of change, not patched together after the fact.
Rate changes like this land on a fixed date, but the work of getting every category right doesn't finish on day one — it's the bundled products, the seasonal menu additions, and the new hairdressing add-on nobody thought to re-check that quietly drift out of compliance months later. Worth a proper audit now, and another one before the next Budget.