Hospitality VAT reduction ‘a very positive step’ for Donegal tourism

News that VAT for the hospitality sector is to be reduced to 9% has been described as ‘the right move, a most welcome move’ for Donegal.

In a region heavily reliant on tourism, many businesses are struggling to keep their doors open and have long been appealing for a VAT reduction first introduced during the Covid-19 pandemic.

Among those who have been leading the call is Cathaoirleach of the Municipal District (MD) of Donegal, Cllr Micheál Naughton. Also manager of the Clanree Hotel in Letterkenny, he knows first hand the challenges faced in the sector.

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“I welcome the VAT reduction for the hospitality sector, something I have been lobbying for the last year,” he told Donegal Live.

“Tourism in Donegal is vitally important to this area; not just hotels but small coffee docks, restaurants, cafés that are dependent on the local community and that contribute much to the local economy. 

“It is a very positive step going forward.”

The councillor says Ireland has one of the highest VAT rates in Europe, and this move is bringing us a little more in line with other EU countries.

“It is the right move for employment and keeping jobs in the local economy, a most welcome move.”

However, Cllr Naughton pointed out that while the VAT reduction would help businesses, the minimum wage increase and introduction of the mandatory pension would add new pressures. 

“It is giving with one hand and taking away with the other so it really is more important than ever to support the hospitality sector.

“We have to wait until July for it to come in but at least we know it is coming and we can budget accordingly.”

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The reduced rate for food and catering businesses, and hairdressers, will apply from July 1, 2026. 

Budget In Brief

-The minimum wage will increase by 65c per hour to €14.15 per hour from January 1

-The ceiling for the USC 2% rate band will increase by €1,318 to €28,700

-A pack of 20 cigarettes is to increase by 50c.

-Excise duty on other tobacco products such as nicotine-containing vapes to increase, adding €1.23 to a 2ml disposable vape and around €6 to a standard 10ml bottle of liquid for reusable vapes. 

-The carbon tax increase will add around 2.5c to the cost per litre of petrol and diesel with immediate effect, and to fuels such as home heating oil and gas from May 1.

-€5,000 VRT relief for electric vehicles to be extended until the end of 2026

-VAT rate on sale of completed apartments to be reduced from 13.5% to 9% with immediate effect and until December 2030

-Rent Tax Credit extended to end of 2028

-Mortgage Interest Tax Relief to be extended for a further two years