VAT Rate Change

As part of the July Stimulus, the Government announced a temporary reduction in the Standard VAT Rate from 23% to 21%. The standard rate of Irish VAT will be temporarily reduced for a six-month period from 1 September 2020 to 28 February 2021.

The standard rate of VAT applies to broadly 50% of activity in Ireland and to a wide range of goods and services including cosmetics. In the instance of the Hair and Beauty industry this VAT rate applies to products sold.

How does the VAT Rate change impact the hair & beauty industry?

You should consider how the change will impact your business and any actions you need to take to ensure that you have all in order for the change. For example:

Pricing. Should you factor the VAT rate cut into your pricing? This is particularly relevant for businesses who set their prices on a VAT-inclusive basis such as retailers.

A price adjustment will be expected by your clients as this reduction in VAT rate has been well publicised. Be sure to adjust your pricing of products at the standard rate of VAT from 23% to 21%. For example sales of cosmetics and sun-bed treatments

Systems: Do you know what steps are required to update your systems for the VAT rate cut? Depending on the particular systems, this may either be a simple task or in other cases may involve significant work on tax codes and tax determination logic, potentially across multiple systems.

Importantly, the change will not impact the VAT treatment of supplies which qualify for the reduced VAT rate which remains at 13.5%. This includes many activities in the tourism and hospitality sector such as meals in a restaurant, hotel accommodation, housing and hairdressing, beauty as well as general repairs and maintenance.

If you are unsure of which VAT rate applies to your goods and services, you can double check here. (https://www.revenue.ie/en/vat/vat-rates/search-vat-rates/VAT-rates-database.aspx)