VAT at 13.5% on building and renovation work.
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VAT at 13.5%
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Updates live as you typeWhy building work is not charged at 23 percent
Most goods and services in Ireland carry VAT at the standard 23 percent rate. Construction is treated differently. When a VAT-registered contractor builds, extends, repairs or renovates residential property, Revenue lets that supply fall under the 13.5 percent reduced rate. This calculator applies exactly that rate to your net figure and shows the VAT-inclusive total you will actually be invoiced. On a €20,000 job the saving against the standard rate is real money, so it pays to understand when 13.5 percent applies and when it does not.
The two-thirds rule that decides the rate
The reduced rate covers the service as a whole, including materials the builder supplies as part of the work. There is a long-standing condition behind this, often called the two-thirds rule. If the cost of the goods supplied under a contract exceeds two-thirds of the total price, the whole job is pushed up to the 23 percent rate. In practice a normal renovation, where labour is a serious share of the bill, stays comfortably at 13.5 percent. The rule mainly bites when a contractor is really just supplying expensive materials with token fitting.
Buy materials yourself from a builders merchant and you pay 23 percent on those at the till, because you are buying goods, not a construction service. That is the single most common point of confusion. The 13.5 percent rate is a feature of hiring a contractor to do the work, not of the materials themselves. So a homeowner who buys their own tiles, kitchen units and timber, then pays a fitter for labour alone, can end up paying more total VAT than if the contractor had supplied everything as one reduced-rate job. It is worth pricing both ways before you split the contract.
A €20,000 extension, priced out
Say a builder quotes €20,000 for labour and materials on a kitchen extension, before VAT. The reduced rate adds 13.5 percent, so €2,700 of VAT, bringing the invoice to €22,700. If that same job had somehow been standard-rated at 23 percent, the VAT would have been €4,600, a difference of €1,900 on a single project.
A note on grants and old reliefs
People sometimes ask about the Home Renovation Incentive. That scheme, which gave a VAT-based income tax credit on qualifying works, closed years ago and no longer exists. Do not budget for it. What does exist today is the reduced VAT rate itself, plus separate SEAI grants for energy upgrades such as insulation and heat pumps, which are paid as cash grants rather than VAT relief. Keep the two ideas apart when you plan a job.
Practical tip from experience: always ask a contractor for a quote that states the VAT rate and amount line by line. A reputable VAT-registered builder will show 13.5 percent clearly. If someone quotes a single cash figure with no VAT breakdown, you have no proof of what rate was applied and no valid invoice for your records. A genuine VAT invoice should also carry the contractor’s VAT number, which you can sanity check, and it protects you if a dispute over the work arises later.
Does the 13.5 percent rate apply to a brand new build?
Yes. The supply and construction of new residential property by a developer or builder is also within the 13.5 percent reduced rate, the same as renovation and repair work. The standard rate is the exception, not the default, for residential construction services.
Can I reclaim this VAT?
A private homeowner cannot reclaim VAT on a home renovation. VAT recovery is for VAT-registered businesses on business activity. For your own home, the 13.5 percent is simply a cost, which is exactly why the reduced rate matters so much to household budgets.