The reduced 9% hospitality VAT rate has been live on food and catering since 1 July 2026, down from 13.5%. If you have not sat down and worked out what that is worth to your own venue, this is the article that does the sum for you - and helps you decide the one thing that actually matters now: do you pass the saving on to customers, or bank it as margin?
Key takeaways
- On every €100 of food and catering sales, keeping your menu prices the same, you now hand Revenue about €3.60 less than you did at 13.5%. That difference drops straight to your bottom line.
- The 9% rate covers food and catering only. Alcohol and soft drinks stay at the standard 23% rate, so a wet-led pub or bar keeps far less of the benefit than a food-led café (KPMG, 2026).
- A €500,000-a-year food-led venue keeps roughly €18,000 more per year - about €350 a week - if it holds menu prices steady.
- The real decision is pass-on versus retain. Cut menu prices by about 4% to win covers, or hold prices and use the margin to absorb the January 2026 cost shock. There is no single right answer.
- The cut is not free money - it is a cushion. From January 2026 the minimum wage rose to €14.15 an hour and pension auto-enrolment began, both landing months before the VAT relief (Ibec, 2025).
What is the 9% hospitality VAT actually worth to my restaurant?
Keeping your menu prices the same, the cut from 13.5% to 9% is worth about €3.60 on every €100 of food and catering sales. That is not a discount you give away - it is VAT you no longer have to collect and remit, so it stays in the business.
Here is why the number is not simply "4.5%". Menu prices are VAT-inclusive: the price on the board already contains the VAT. When the rate falls, the slice of each sale that belongs to Revenue shrinks, and the rest is yours.
- At 13.5%, VAT is 0.135 ÷ 1.135 = 11.9% of a VAT-inclusive sale.
- At 9%, VAT is 0.09 ÷ 1.09 = 8.3% of that same sale.
- The gap - about 3.6% of your gross food takings - is what you keep if prices stay put.
The reduced 9% rate for restaurant, café and catering services took effect on 1 July 2026, replacing the 13.5% rate that applied up to 30 June (Revenue, 2026; vatcalc, 2026).
A worked example: a mid-size Irish café
Take a food-led café turning over €10,000 a week in food and catering sales, VAT-inclusive - roughly €520,000 a year. Assume it holds its menu prices exactly where they were on 30 June.
| Line | At 13.5% VAT | At 9% VAT |
|---|---|---|
| Weekly food & catering sales (VAT-incl.) | €10,000 | €10,000 |
| VAT owed to Revenue | €1,189 | €826 |
| Net kept by the business | €8,811 | €9,174 |
| Extra retained per week | - | €363 |
Over a year, that is roughly €18,900 kept in the till rather than paid over in VAT - for changing nothing except the rate in your system. On a €20 main course held at €20, you now keep about 73c more per plate.
That €18,900 is the size of the decision in front of you. It is real money, but it is not a windfall - it is a lever. What you do with it is the rest of this article.
What is covered - and what is not
The reduced rate is narrower than many owners assume. It applies to most food and certain drinks sold in a restaurant, café, hotel, bar, takeaway or other catering setting, but soft drinks and alcoholic drinks remain subject to the standard 23% VAT rate (KPMG, 2026).
The practical consequence: the more of your turnover comes from drink, the less the cut is worth to you.
- A food-led café or takeaway - coffee, brunch, lunch, dinner - sees almost all of its sales move to 9%. This is where the benefit is largest.
- A wet-led pub or bar keeps 23% on pints, spirits and minerals. Only the food menu - the toasties, the Sunday roast, the burgers - shifts to 9%.
So before you count your €18,000, split your own till report by food versus drink. Your real saving is 3.6% of the food and catering slice only, not of total turnover.
If you are unsure which menu line takes which rate, our guide to the hospitality VAT rate for Irish restaurants walks through the food-versus-drink boundary line by line.
The decision: pass it on, or keep it?
This is the question the cut actually asks you. Both answers are defensible; the right one depends on your venue.
Option A - pass it on to win covers
Drop your menu prices by roughly the VAT differential and you can advertise lower prices while keeping the same margin. On that €20 main, you could go to about €19.25 and still net what you netted before.
- Best for: price-sensitive locations, lunch trades, takeaways competing on value, and anyone trying to rebuild covers after a quiet stretch.
- The risk: once prices come down they are hard to put back up. If your costs climb again in 2027, you have spent your cushion.
Option B - hold prices and bank the margin
Keep the menu exactly as it is and let the 3.6% flow to the bottom line. Most operators are leaning this way, because the saving is already spoken for.
- Best for: food-led venues on thin margins that need to absorb rising wage and input costs without raising prices on customers.
- The risk: none to your P&L, but you forgo the marketing benefit of visibly cheaper prices.
There is no wrong choice here - there is only the choice that fits your covers, your costs and your customers. Many owners are splitting the difference: holding headline prices but reinvesting a slice into a better lunch deal or a loyalty offer.
Why most owners will bank it: the January 2026 cost shock
The VAT relief did not arrive into calm waters. It landed months after two significant cost increases that hit on 1 January 2026:
- The National Minimum Wage rose by 65c to €14.15 an hour for workers aged 20 and over from 1 January 2026 - a rise of nearly 5% (Ibec, 2025).
- Pension auto-enrolment began, adding a new employer contribution on top of payroll.
The Restaurants Association of Ireland (RAI) called the 9% restoration a "long-fought victory for our industry", but warned that the January costs would offset it for food-led venues, with CEO Adrian Cummins warning at Budget time that "July 2026 is too far away for many businesses already on the brink" (RAI, 2025).
The wider cost picture explains the caution. Across the sector, RAI's Cost of Doing Business survey found payroll now accounts for nearly 39% of turnover, up from just under 32% in 2022, and food costs have risen from 28% to over 34% of turnover, while insurance premiums climbed 32.89% and utility bills 25.81% over the same period. 150 food-led businesses closed in the first quarter of 2025 alone, and 65% of operators reported a decline in 2024 (RAI, 2025).
Seen against that backdrop, the ~€18,000 the VAT cut returns to a mid-size venue is less a bonus than a partial refund of a wage bill that grew faster. For many, banking it is not greed - it is survival.
The cut cost the Exchequer an estimated €232 million in 2026 and €681 million in a full year, the largest single measure the sector campaigned for (Irish Examiner, 2025). It is a genuine intervention - worth making sure you actually capture it.
How to make sure you actually capture the saving
The cut is worthless if your till is still charging 13.5% on food, or if your receipts split the rates incorrectly. Three practical checks:
- Confirm your POS is applying 9% to food lines. Every till should now split a single receipt across 9% (food), 13.5% (legacy items) and 23% (alcohol and soft drinks). If yours cannot handle multi-rate receipts, that is a buying signal - see our shortlist of POS systems built for the new VAT split.
- Audit a week of receipts. Pull a few and check the VAT breakdown by hand. A food item still ringing at 13.5% is money you are overpaying to Revenue every day.
- Update your accounting codes. Make sure your bookkeeper or software maps food sales to the 9% code from 1 July 2026, so your VAT return is right the first time.
If you decide to bank the saving, protect it. Every euro you keep is easier to hold onto when more of your orders come through your own website or ordering page rather than a delivery app skimming commission on top of every order - the margin you just recovered on VAT can vanish just as fast on aggregator fees. Reducing that leakage is the other side of the same coin: our guide to controlling food costs in your Irish restaurant covers the levers you fully control, and our nine ways Irish restaurants are cutting overheads rounds out the fixed-cost side.
The bottom line
The 9% hospitality VAT rate is worth about 3.6% of your food and catering turnover if you hold your prices - roughly €18,000 a year for a €500,000 food-led venue, and next to nothing on your drinks sales. Work out your own number by splitting your till report into food and drink, then make the pass-on-versus-keep call deliberately rather than by default. Given the January wage and pension costs, most Irish operators are wise to bank the margin, at least for the first year.
Frequently asked questions
When did the 9% hospitality VAT rate come into effect in Ireland?
The reduced 9% rate on food and catering services took effect on 1 July 2026, when the second reduced rate replaced the 13.5% rate that applied up to 30 June (Revenue, 2026).
Does the 9% rate apply to alcohol and soft drinks?
No. Alcoholic drinks and soft drinks remain at the standard 23% VAT rate. Only food and catering services moved to 9% (KPMG, 2026).
How much is the VAT cut actually worth per €100 of food sales?
If you keep your menu prices the same, roughly €3.60 per €100 of VAT-inclusive food and catering sales. The VAT share of each sale falls from about 11.9% to about 8.3%.
How do I calculate my own saving?
Take your food and catering turnover only (exclude alcohol and soft drinks, which stay at 23%) and multiply by about 3.6%. For €500,000 of food sales, that is roughly €18,000 a year.
Should I lower my menu prices now that VAT has fallen?
That is a business decision, not a rule. You can pass the saving on with a ~4% price cut to win covers, or hold prices and keep the margin to offset the January 2026 wage and pension increases. Food-led venues on thin margins are mostly holding prices.
Why does my pub only see a small benefit?
Because the 9% rate covers food, not drink. Pints, spirits and minerals stay at 23%, so a wet-led venue only gains on its food menu - the smaller share of its turnover.
What was the VAT rate before 1 July 2026?
The hospitality VAT rate on food and catering was 13.5% up to 30 June 2026, before the cut to 9% (Revenue, 2026).
Is the 9% rate permanent or temporary?
Budget 2026 introduced it as a permanent reduction for food, catering and hairdressing services, rather than a time-limited measure (KPMG, 2026).
What else changed for Irish restaurants in 2026?
From 1 January 2026 the National Minimum Wage rose to €14.15 an hour and pension auto-enrolment began, both adding to payroll costs months before the July VAT relief (Ibec, 2025).
Do I need to change my POS system for the new rate?
You need a till that applies 9% to food and can split a single receipt across 9%, 13.5% and 23%. If yours cannot, it is worth reviewing your options - check that any new system handles multi-rate VAT before you commit.
