VAT Matters Ireland – February 2026 – The Latest EU and Irish VAT Developments

In VAT Matters this month, David Duffy and Kathryn Hewitt discuss the latest VAT Modernisation update from Revenue, as well as Revenue guidance on various matters, including the 9% VAT rate for apartments.

VAT Modernisation

In October 2025, Revenue announced their VAT Modernisation roadmap for the phased introduction of mandatory electronic invoicing (“e-invoicing”) and digital reporting for domestic transactions.

The first phase will be effective from 1 November 2028 under which VAT registered large corporates will be required to issue e-invoices for domestic business-to-business (“B2B”) supplies and report certain data to Revenue in respect of same. In this regard, Revenue now have confirmed a business is included in Phase 1 if it is:

  1. a VAT registered business whose tax affairs are managed by the Large Corporates Division of Revenue, and
  2. established or has a fixed establishment in Ireland.

Revenue intends to write to such businesses in the coming weeks to confirm they are included in Phase 1.

Phase 2 VAT registered businesses which are not “large corporates” as defined above but are engaged in intra-EU trade will be subject to e-invoicing and digital reporting requirements from 1 November 2029.

Phase 3 will involve the introduction of intra-EU cross-border e-invoicing and reporting requirements under the EU’s VAT in the Digital Age (“ViDA”) proposal.

9% VAT rate for apartments

Finance Act 2025 formally adopted a reduction in the VAT rate for the supply of apartments from 13.5% to 9%, which originally came into effect on 8 October 2025, and was updated with effect from 26 November 2025. From 26 November 2025 until 31 December 2030, the 9% rate applies to the “supply of immovable goods, as part of a social policy, which are, or when completed, will be:

  • one or more than one apartment, used or to be used for residential purposes, in an apartment block, or,
  • an apartment block, used or to be used for residential purposes, but excluding any part of the apartment block that is not used or to be used for residential purposes”.

The 9% rate also applies to “services consisting of the development, until completed” of apartments or apartment blocks that fall within the above provisions.

For the purposes of the above provisions, an apartment block is defined as a multi-storey building that comprises, or will comprise, at least three apartments with grouped or common access.

In December, Revenue issued a new Tax and Duty Manual (“TDM”) with further guidance on the application of the reduced rate.

While “apartment” is not defined in the legislation, the TDM states that apartment may include (but is not limited to) studios, basement apartments, penthouse apartments, duplex apartments and student accommodation.

The TDM also clarifies that the requirement that an “apartment block” has grouped or common access can include apartments having their own door, provided at least three apartments in the block have common access.

The TDM also states that internal common areas, external common areas, and car parking spaces can be included within the 9% rate, but amenities such as gyms, work hubs or a pool do not qualify. Therefore, an apportionment of cost/price may be required in certain circumstances.

While the guidance is welcome in clarifying the scope of the reduced rate, we can still envisage complex scenarios arising and recommend careful consideration of each transaction.

Other Revenue guidance

A number of other VAT TDMs have been recently issued/updated by Revenue, as outlined below:

  • Revenue eBrief No. 250/25 contains guidance on the VAT treatment of the hire of a room for meetings/events and VAT deductibility for qualifying conference accommodation.
  • Revenue eBrief No. 250/25 updated the TDM on the removal of the VAT waiver of exemption scheme following Finance Act 2025.
  • Revenue eBrief No. 210/25 updated the TDM on Relevant Contracts Tax for Principal Contractors, amending section 4 to include links to Revenue’s updated guidance on determining the correct employment status of subcontractors.
  • Revenue eBrief No. 232/25 published a new TDM on the VAT treatment of extended warranties, clarifying when an extended warranty constitutes an insurance service (and is therefore VAT‑exempt). The TDM also explains VAT deductibility rules and the treatment of commission payments to retailers.
  • Revenue eBrief No. 231/25 issued a new TDM on VAT Deductibility for Insurance & Reinsurance, consolidating and replacing earlier guidance (including the now‑withdrawn ‘VAT Deductibility for Life Insurance Companies’ TDM). The new manual explains VAT deductibility for life, non‑life, reinsurance and investment‑related activities, and sets out guidance for overhead apportionment and treatment of mixed activities.
  • Revenue eBrief No. 240/25 issued a new TDM on the VAT treatment of pension scheme costs, consolidating previously separate guidance.

 

David Duffy is an Indirect Tax Partner in KPMG’s Dublin office and Kathryn Hewitt is an Indirect Tax Manager in KPMG’s Dublin office.