Revenue’s latest update on the construction and supply of apartments and apartment blocks in Ireland has been issued. Developers need to know what has changed, what has been clarified, and what is still a bit murky!
Let’s break it down.
VAT rate reduction
You will no doubt remember the announcement as part of the Budget on 8 October 2025 that the VAT rate on the sale of apartments was reduced from 13.5% to 9%. Sounds simple, right? As always with tax, details matter!
Financial Resolution 4, passed immediately after the Budget, gave legislative effect to this change and used the phrase: “the supply of an apartment, used or to be used for residential purposes, in an apartment block.”. It was unclear whether the 9% rate would apply all types of arrangements for the sale of such apartments, particularly where sales were structured as a combined contract for the construction of the apartments and the supply of the underlying site.
What followed was a period of uncertainty until the publication of Revenue’s guidance, which aims to clear up (some of) the confusion.
So what is an apartment?
Revenue’s guidance clarifies that not every unit with a front door and a few floors above it will qualify. Here is what you need to know:
- Apartment: For VAT purposes, an apartment is a self-contained residential unit in a building containing multiple such units. A qualifying apartment for the purposes of the 9% rate is an apartment but only where it is in an “apartment block”.
- Apartment Block: A qualifying apartment block is defined by Revenue as a multi-storey residential building (or part of a building) containing no less than three apartments with grouped or common access and specifically includes student accommodation blocks. The key is that the units are structurally contained within the same building.
So, if you are selling a single apartment in a converted house, or a standalone duplex with two apartments, the 9% VAT rate will not apply. Revenue is targeting the “block” element, multiple units under one roof.
Any portion of an apartment block not used exclusively for residential purposes, such as commercial units, gyms, pools, or work hubs, is excluded from the 9% VAT rate. These elements will remain subject to the 13.5% rate.
What about site & build contracts?
One of the big questions has been whether the 9% VAT rate applies only to the sale of completed apartments, or if it also covers site and build contracts (where the buyer purchases a site and contracts for construction).
Where the contract is for both the supply of the site and the construction of qualifying apartments in an apartment block. This 9% rate applies only to the qualifying residential elements and only up to the point of completion, as defined by Revenue. Completion is deemed to occur when the building is capable of being used for its intended residential purpose, typically evidenced by connection of utility services.
So, if you are supplying finished apartments in an apartment block or entering into a contract to build apartments in a qualifying block with a supply of the underlying site, you will benefit from the 9% rate. But if you are building a one-off unit or something that doesn’t fit the “apartment block” definition, you are likely still at 13.5%.
Grey areas
Revenue’s guidance is helpful, but there are still some grey areas.
- The principal one being mixed-use developments. If your block contains both residential apartments and commercial units (e.g. retail units on the ground floor), the residential apartments can still qualify, but the commercial units won’t. If there are common areas that have shared use (e.g. the lobby area) Revenue indicates that an apportionment exercise will be needed using, for example, floor area.
- If the block contains amenities that are connected with the residential use (e.g. a gym, a pool, or a work hub for residents) that is also not considered by Revenue to be “for residential purposes” and therefore the 9% VAT rate will not apply to that portion of the build.
- Construction services only qualify up the point of completion of the apartment or apartment block. Revenue consider completion to be the point where the building can effectively be used for the purpose for which it was designed. A key factor is when utility services are connected.
Practical tips for developers
- Check the definitions: Before assuming you’ll get the 9% rate, check whether your development clearly fits Revenue’s definition of an apartment and an apartment block.
- Contract wording matters: Make sure your contracts clearly describe the units as qualifying apartments in a qualifying block and that any construction services are for the construction of such apartments or apartment block up to the point of completion.
- Separate the supplies: If your development is mixed-use, contains amenities that Revenue considers not to be for residential purposes, or includes construction services make sure you are clear on which parts qualify for the 9% rate and which don’t. You may want to consider separating the supplies contractually and apportioning sales prices between the different elements.
- Get advice early: If in doubt, get professional advice before you sign contracts or start marketing units using financial modelling assuming the 9% rate.
Why does this matter?
The difference between 9% and 13.5% VAT is significant for developers’ margins. Getting it wrong could mean an unwelcome surprise in your financials down the line.
This update is a welcome clarification, but it is not a free-for-all. The 9% rate is targeted at genuine apartment blocks, not one-off units, or small-scale developments. If you are in the business of building or selling apartments, make sure you are on the right side of the line.
VAT and property are full of nuance. The published guidance helps, but there’s still room for interpretation and potential pitfalls. If you are unsure, don’t guess. Get advice, check the definitions, and make sure your contracts are watertight.
