The rate of VAT on electricity in Ireland is currently set at 9%. It was announced as part of Budget 2026 that this reduced rate of VAT will be extended until December 31, 2030. The original VAT rate of 13.5% was due to return on December 1, 2025, but this has been delayed until 2030.
How Much Is VAT on Electricity in Ireland?
The VAT rate on electricity in Ireland is 9%. This is a significantly reduced rate that has been put in place by the Irish government as a measure to help households and businesses with the rising cost of energy bills.
The decision maintains the 9% rate through December 31, 2030, responding to ongoing energy crisis impacts. Ireland's standard VAT rate is 23%, while the general reduced rate stands at 13.5%. The current 9% qualifies as a "second reduced rate" subject to periodic extensions.
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What Is VAT and How Does it Apply to Electricity?
Value Added Tax represents a consumption tax levied on goods and services at each stage of production and distribution, ultimately paid by the end consumer.
In Ireland, utility service VAT amounts are itemised separately on your bill, to make your utility bill easier to understand.
VAT's governmental revenue function means a portion of their electricity bill goes directly to the Exchequer.
For businesses, the rules are more nuanced, with implications for refunds depending on their VAT registration status and the nature of their operations.
How Has VAT on Electricity Changed in Ireland?
The current 9% VAT rate on electricity is not static. Ireland has seen various VAT rates applied to energy over the years, reflecting economic conditions, government policy, and broader EU directives.
Historically, the supply of electricity has typically been subject to a reduced VAT rate in Ireland, rather than the standard rate. Before current rates, the common reduced rate for electricity was 13.5%.
| Year | VAT Rate |
|---|---|
| 2020 | 13.5% |
| 2021 | 13.5% |
| 2022 | 13.5% |
| 2023 | 9% |
| 2024 | 9% |
| 2025 | 9% |
| 2026 (projected) | 13.5% |
The temporary reduction to 9% was first introduced on May 1, 2022. This was a direct response to the escalating energy prices driven by global events, particularly the war in Ukraine, and its impact on the cost of living.
How Is VAT on Electricity Applied to My Bills?
For residential customers, the VAT charged on electricity bills is straightforward and is typically included in the total amount you pay.
The 9% rate applies to all components of your electricity bill, including:
- Unit rates
- Standing charges
- PSO levy
- Carbon tax
This reduced rate provides a direct saving for households compared to what they would pay if the 13.5% or standard 23% rate were applied.
Is VAT on Electricity in Ireland the Same for Businesses?
The application of VAT on electricity for businesses in Ireland is more intricate and depends largely on their VAT registration status.
- VAT-Registered Businesses: The VAT paid on their electricity bills is generally recoverable.
- Non-VAT-Registered Businesses: This includes smaller businesses below registration thresholds (€85,000 for goods; €42,500 for services as of March 1, 2025). These businesses cannot reclaim the VAT they pay on their electricity bills.
- Exempt Sectors: Certain sectors, such as financial services, education, and charities, often provide VAT-exempt services. As they do not charge VAT on their outputs, they are mostly not entitled to reclaim VAT on their inputs, including electricity.
Will the Rate of VAT on Electricity in Ireland Increase?
The most recent extension confirms that the 9% rate will apply until December 31, 2030. After this date, the VAT rate for electricity is currently scheduled to revert to the previous reduced rate of 13.5%.
Any further extensions beyond December 31, 2030, would be considered as part of the normal budgetary process in Ireland.
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How Can I Reduce My Electricity Bills?
With the VAT rate on electricity in Ireland subject to potential future changes, taking proactive steps to reduce your consumption and manage your bills becomes even more crucial.
Optimize Energy Use
- Always turn off lights and unplug appliances
- Use timers and thermostats effectively
- Run washing machines and dishwashers only when full
- Switch to LED bulbs and maximize natural daylight
Talk with Your Supplier
- Review tariffs for usage patterns
- Discuss flexible payment plans
- Explore off-peak night rates for smart meter customers
Government Schemes
- Fuel Allowance: Payment assistance for heating costs
- Household Benefits Package: Collection of financial supports
- Disability Allowance: Weekly payments for people with disabilities substantially restricted from work
- SEAI Grants: Incentives for energy efficiency improvements and renewable energy
Frequently Asked Questions About VAT on electricity in Ireland
Yes, as a member of the European Union, Ireland is subject to EU VAT Directives, which generally require VAT to be applied to goods and services, including energy supplies like electricity. While Member States have some flexibility in setting rates, the principle of charging VAT on electricity is a requirement.
VAT-registered businesses in Ireland typically reclaim VAT paid on eligible expenses, including electricity, through their regular VAT returns submitted to the Revenue Commissioners. They will offset the VAT paid on their purchases (input VAT) against the VAT they charge on their sales (output VAT). Any net reclaimable amount is refunded by Revenue.
The Public Service Obligation (PSO) Levy is a government-mandated charge added to electricity bills to support renewable energy generation and maintain security of supply in Ireland. The Carbon Tax is a tax applied to fossil fuels, which indirectly impacts electricity generation costs and is passed on to consumers. VAT is applied to these levies because they are considered part of the overall cost of the electricity supply service, similar to the unit charges and standing charges.