In late July, the Irish Government announced its updated stimulus package for businesses. It included a number of initiatives around employment and wage subsidies, grants, loans and tax cuts. One of the measures announced is a temporary reduction in the standard VAT rate in Ireland.
What is the change?
- The standard rate of VAT in Ireland has been reduced from 23% to 21%. This change comes into effect from 1st September 2020
- It is a temporary reduction, lasting for a six month period until 28th February 2021
- The change will not impact the VAT treatment of supplies that qualify for the reduced rate of VAT, which remains at 13.5%. This includes many activities in the tourism and hospitality sector
Further guidance on the scope of this relief can be found on the government website – please keep checking the Gov.ie website for further updates.
How to apply the VAT reduction in Xero
You may already have a 21% VAT rate in your Xero account that you can use. If you don’t, you can account for the reduced rate by creating a custom 21% tax rate and applying it to the relevant transactions. Find out how to add and edit tax rates in Xero.
To save time, you can apply the reduced rate to multiple transactions. Xero enables you to set up default tax rates in areas like:
- Specific accounts in your chart of accounts
- Customer and supplier contact
- Repeating invoice templates
- Bank rules
If you have any questions about which areas you should update, please contact your accountant or Xero support.