Ireland – Budget 2025 Brings New VAT Threshold and VAT Rates

The Government of Ireland, more precisely, the Ministers for Finance and Public Expenditure, NDP Delivery and Reform, announced the budgetary 2025 plan at the beginning of October. The 2025 Budget includes three measures: one-off cost-of-living support, tax, and expenditure. Some tax measures include VAT and excise duty.

Impact of Budgetary Plan on VAT

Due to inflation and other factors that put additional burdens and pressures on citizens, thus increasing the cost of living, the 2025 budgetary plan proposes extending the 9% VAT rate on gas and electricity from November 1, 2024, to April 30, 2025. 

An additional tax measure, or initiative, is also proposed in the 2025 Budget to support climate action. The 2025 proposes a VAT reduction on heat pumps from January 1, 2025, to 9%  to encourage homeowners to buy and install the pumps. However, if passed, heat pumps must meet specific technical standards to qualify for this 9% VAT rate.

As part of health measures, the proposed budgetary plan also includes a EUR 1 increase in the excise duty and VAT on a pack of cigarettes.

Tax measures to support businesses include a proposal to increase the VAT registration threshold for the supply of goods to EUR 85,000 and the provision of services to EUR 42,500. This measure aims to help small businesses remain outside of VAT.

Conclusion

All these measures are not final at this moment and are subject to further discussion and potential modification. Therefore, we will have to wait for the final version of the Budget 2025 to see what incentives and measures will be adopted and implemented.

Nevertheless, the government of Ireland is searching for ways to reduce the financial burdens that its citizens face and to introduce policies to help companies grow further without suffering additional administrative and economic pressures.

Source: Government of Ireland - Budget 2025 Tax Policy Changes, Government of Ireland - Budget 2025