The government has approved plans to extend the 9% VAT rate for the tourism and hospitality industry for a further six months at an estimated cost of €250m to the Exchequer.

The lower VAT rate for businesses in heavily Covid-hit sectors will remain in place until the end of February 2023, having been set to expire at the end of August 2022.

The extension will cover the same goods and service as the original measure -- restaurant suppliers, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks and hairdressers as well as printed matter such as brochures, leaflets, programmes and catalogues.

"The tourism and hospitality sector was one of those most impacted by the public health restrictions put in place throughout the pandemic," Minister for Finance Paschal Donohoe said.

"Through no fault of their own, bars, hotels and restaurants had to close on multiple occasions to help the country make its way through the worst of the public health crisis.

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"The government put in place unprecedented support for the economy with the wage subsidy scheme supporting the incomes of citizens across the country. The accommodation and food services sector was the most supported by the employment wage subsidy scheme to ensure that workers maintained the link with their employers and to give businesses the best possible chance to weather the pandemic.

"The 9% VAT rate was introduced in response to the challenges posed by Covid-19 to support the hospitality sector and today the Government has decided to extend the period when the 9% rate will apply for a further six months. This will provide further support to the tourism and hospitality sectors over the busy November/December period and into the early New Year.” 

Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media Catherine Martin said the industry has repeatedly raised the importance of extending the lower rate of VAT for the whole of 2022.

"I have pressed on this issue for several months now and I know that this extension will give the sector time to rebuild and consolidate after a harrowing two years under Covid-19. The extension will promote business survival and support employment in the industry," she added.

The 9% rate of VAT for tourism and hospitality was introduced in Budget 2021 and was extended until 31 August in Budget 2022. The 13.5% VAT rate will be restored on 1 March, 2023.

(Pic: Getty Images)