DUBLIN: Finance Minister Paschal Donohoe said in his budget speech that the VAT rate would be reduced from 13.5% to 9% to ease the tourism and hospitality sector which had collapsed in Covid.
The new exemption will take effect from November 1.
The minister said the VAT cut comes in the wake of the severe challenge facing the economy in the Covid crisis.
The minister said the VAT exemption was meant to help broad-based economic activities and would benefit businesses and traders.
At the same time, he said support for the Knowledge Development Box (KDB) would be extended until the end of December 2022.
The Knowledge Box is an intellectual property system that supports businesses in maintaining and preventing the exploitation of assets resulting from research and development activities in Ireland.
The minister said the closure of Covid had also affected the film industry and would provide an additional 5% incentive to the sector.
Work will soon begin to develop tax credit as part of its support for the digital gaming sector.
He said the capital allowance scheme for energy efficient equipment would be extended for another three years.