The VAT rate for the tourism and hospitality sector will drop from 13.5% to 9% from Sunday November 1 as announced by the Finance Minister in Budget 2021.
The reduced VAT cut will apply to the hospitality sector as well as catering and restaurant supply companies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter and hairdressing.
It will stay at 9% until December 2021.
Finance Minister Paschal Donohoe said he was introducing the reduction in recognition of the unprecedented challenges facing particular sectors of the economy.
"The reason I chose a start date of November 1 was to introduce this measure at the earliest possible moment to allow those businesses that are currently open to benefit," the Minister said.
Mr Donohoe acknowledged that many businesses remain closed for now and those that are open are operating at significantly reduced capacity.
"I am putting this reduced rate in place until December 2021 in order to provide significant additional support to businesses throughout 2021 when hopefully our economy and society can start to return to some form of normality," he stated.
Based on 2017 figures of the number of VAT traders in 9% sectors, the measure has the potential to benefit approximately 14,600 businesses.
It is expected that the reduced VAT rate will cost the Exchequer €336m in 2021 and €401m in total.