The 9% VAT rate for hospitality and the Temporary Business Energy Support Scheme (TBESS) have been extended by the government as part of €1.2bn package of cost-of-living measures agreed on Tuesday.
The standard 13.5% VAT rate for businesses in hospitality, tourism and other sectors will be restored from September, while TBESS will operate in an expanded capacity until the end of May.
Businesses availing of TBESS will now receive relief on 50% of the annual increase in their cost of their electricity bills, and a new grant will be created for businesses using LPG or kerosene.
The monthly cap on TBESS payments will be lifted from €10,000 to €15,000 in March, and the cap for businesses with multiple locations will rise from €30,000 to €45,000 per month.
Lower VAT of 9% on gas and electricity will apply until October at an estimated cost of €115m.
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Meanwhile, excise rates on petrol, diesel and marked gas oil will be restored on a phased basis, with per-litre increases of 6c for petrol, 5c for diesel and 1c for marked gas oil on 1 June.
There will be further increases of 7c, 5c, and 1c on 1 September, and then 8c, 6c, and 3c on 31 October, at which point excise rates will be fully restored. The excise reductions are expected to costs €383m.
"This will help families, businesses, and anyone who drives a vehicle, in particular those who commute to work or travel long-distance. The next energy credit is also due in March, as announced previously," said Taoiseach Leo Varadkar.
“For business we’ve made it easier to apply for TBESS to help with electricity and gas bills, and the level of relief has been increased to 50% of the cost of eligible energy bills. The special reduced 9% VAT rate for hospitality businesses will be extended from March to August."
Employers group Ibec welcomed the decisions, saying they would play an important role in containing inflationary pressures while providing certainty to businesses.
“It is welcome to see reforms to the TBESS as the previous eligibility criteria and support levels were too restrictive, leading to poor take up from industry despite there being an ongoing energy affordability crisis," said Fergal O'Brien, executive director of lobbying and influence at Ibec.
"The support levels to date have been below that seen in other European countries, so today’s announcement will go some way to addressing the competitive disadvantage many businesses have faced in recent months.
“It is also positive to see the 9% VAT rate extended for another six months. This policy has been instrumental in helping businesses stay afloat and maintaining many jobs across the country.
"Removal of this buffer at this time would have put many in the experience economy, particularly SMEs, in jeopardy, and would only have added to inflationary pressures and undermined international competitiveness. While business would have preferred to see the 9% VAT rate made a permanent fixture, today’s announcement will provide some relief and certainty.”
Denyse Campbell, president of the Irish Hotels Federation,, said the the 9% VAT rate, would go a long way to helping to sustain the recovery in the tourism and hospitality sectors.
"When you look at the tourism VAT rates among our key European competitors, it is clear that the 9% rate is the right rate for Ireland," Campbell said.
"At 9%, Ireland is in line with our European neighbours, in particular those countries where tourism plays a key role in their economy.”
(Pic: Sasko Lazarov/RollingNews.ie)
