Understanding how VAT works for Irish service businesses is essential for staying compliant, confident, and financially organised. Whether you’re in tourism, hospitality, or trades, VAT can influence your pricing, cash flow, and business decisions. While many small businesses rely on accountants or tax advisers to manage VAT filings, having a clear understanding of the rules helps you stay on top of day-to-day operations.
📌For official VAT guidance, Revenue.ie offers a full overview of VAT for Irish service providers, including rates, registration, and exemptions.
This guide breaks down how VAT works for Irish service businesses, with practical examples from sectors like tour operations and catering — where VAT treatment varies based on how services are delivered.
1️⃣ Irish VAT Rates: What Service Businesses Need to Know
To understand how VAT works for Irish service businesses, you need to be familiar with Ireland’s four main VAT rates:
| VAT Rate | Applies To | Examples |
|---|---|---|
| 23% (Standard Rate) | Most goods and services | Professional services (consulting, legal, software, IT), electronics, clothes (adult), household goods, general retail |
| 13.5% (Reduced Rate) | Labour-intensive services, energy, some property-related services | Construction, repair/maintenance, cleaning, heating oil, gas, electricity, short-term property letting |
| 9% (Second Reduced Rate) | Tourism & hospitality, newspapers, hairdressing | Hotel accommodation, restaurants, catering, cafes, hairdressing, newspapers/journalism |
| 0% (Zero Rate) | Essential goods, exports, certain publications | Basic food (bread, milk, fruit, veg), children’s clothing & shoes, medicines, books, exports outside the EU |
ℹ️ Note for businesses:
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VAT rates can change (e.g. the 9% rate for hospitality has been temporary in the past), so always check Revenue’s latest updates.
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Some items have exempt status rather than 0% VAT (e.g. financial, medical, and education services). Exempt means no VAT charged and no VAT reclaim.
2️⃣ How VAT Works for Irish Service Businesses in Tourism & Hospitality
Sectors such as tourism and hospitality often benefit from reduced VAT rates, making them a useful example of how VAT works for Irish service businesses. These industries tend to be seasonal, labour-heavy, and sensitive to pricing, which is why Irish tax law allows for tailored VAT treatments.
| Service Type | VAT Rate | Notes |
|---|---|---|
| Hotel accommodation | 9% | Short-term stays and guesthouses |
| Restaurant meals (excl. alcohol) | 9% | On-premises or catered meals |
| Guided tours (own staff) | 13.5% | If delivered directly |
| Private transport (own vehicle) | 13.5% or Exempt | Depends on structure |
| Packaged tours (resold services) | 0% on margin | Under TOMS scheme |
Knowing which rate applies — and when — is essential to applying VAT correctly. Misclassification can lead to penalties or missed reclaim opportunities.
3️⃣ Direct Service Delivery: When 13.5% VAT Applies
One of the most common scenarios in how VAT works for Irish service businesses involves direct delivery. If your business uses its own staff, vehicles, or venues to provide a service — rather than outsourcing — then the 13.5% VAT rate typically applies.
This VAT rate applies when:
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You use your own staff for guided experiences or services.
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You operate your own transport (e.g. minibus) or premises.
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You are not bundling in third-party services.
✅ In this situation:
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You are the principal supplier.
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You must charge 13.5% VAT on the full service price.
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You may be able to reclaim VAT on related business expenses (fuel, maintenance, meals, etc.).
This structure offers better clarity and VAT recovery potential, which is why it’s important to grasp how VAT works for Irish service businesses offering direct experiences.
4️⃣ How TOMS Works Under VAT for Irish Service Businesses
The Tour Operators Margin Scheme (TOMS) is a special VAT rule for businesses that resell services purchased from others. Instead of applying VAT to the full price, you only pay VAT on your margin — your profit.
Understanding TOMS is critical to learning how VAT works for Irish service businesses that act as intermediaries or bundle offerings.
Under TOMS:
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VAT isn’t shown on the invoice.
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You only pay VAT on the profit margin.
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The current VAT rate on the margin is 0% in Ireland.
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You cannot reclaim VAT on the purchased services included in the package.
This scheme benefits businesses that sell pre-designed packages but removes the ability to claim back VAT. Accurate records are still essential to ensure you apply TOMS correctly.
5️⃣ Example Scenario: Direct Supply and 13.5% VAT
Let’s say you operate a small business running full-day guided tours along the west coast of Ireland. You:
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Own a licensed minibus.
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Employ a full-time tour guide.
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Provide lunch at your own restaurant.
In this case, you’re not reselling someone else’s services — you’re delivering the full experience in-house. This is a textbook example of how VAT works for Irish service businesses that operate independently.
📌 VAT treatment in this case:
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Charge 13.5% VAT on the total tour price.
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Reclaim VAT on allowable expenses like food, fuel, insurance, and upkeep.
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Issue VAT invoices clearly showing applicable rates.
Understanding these practical applications helps businesses avoid undercharging, stay compliant, and maintain healthy cash flow.
✅ In Summary
| Scenario | VAT Treatment | VAT Rate |
|---|---|---|
| Delivering services directly | Standard VAT rules | 13.5% |
| Reselling pre-bought packages | TOMS (on margin) | 0% on margin |
| Scheduled public transport | VAT-exempt | 0% |
| Hotel-only reselling | Normal VAT treatment | Usually 9% |
Whether you’re working directly with customers or acting as a middleman, understanding how VAT works for Irish service businesses allows you to apply the correct rules, keep records accurately, and avoid costly errors.
📣 Stay VAT-Ready with Support That Understands Your Sector
At RizFin,we know how VAT works for Irish service businesses — because we support them every day. While we don’t provide tax advice, we ensure your invoicing, record-keeping, and systems are VAT-ready and reliable.
From trades to tour operators, we help you organise your finances so you can focus on delivering your service — and not worry about VAT surprises.
👉Need support aligning your books with VAT obligations?
We offer expert bookkeeping and reporting services — tailored for the real-world needs of Irish Service Businesses.
Let’s make VAT one less thing to stress about.
