Services taxable at the rate of the goods (the two-thirds rule)

Updated on April 20, 2022

What is the two-thirds rule?

Parts for washing machine repairs, for example, are frequently provided in exchange for the supply of a service.

This transaction is taxed for VAT purposes according to a set of guidelines.

Note

VAT is not included in any of the costs or calculations.

If the materials utilised to complete the work account for more than two-thirds of the overall cost,

The rate for the items is then applied to the transaction as a whole.
If the overall cost of the job is less than two-thirds of the total cost of the commodities used in the work:

The service’s rate is subsequently applied to the transaction as a whole.
The two-thirds rule refers to this situation.

Example

At the rate of the commodities, services are taxed.
Price of repair: €300, plus VAT, for a guitar.
I came up with this:
23 percent of the cost of materials (VAT exclusive)
€220
The total cost of labour, overhead, and profit is €80.
€220 is the price of the materials (VAT exclusive) exceeds two-thirds of the total cost (VAT exclusive)

In this case, the tax bill is €69 (€300 x 23%).

Exceptions to the two-thirds requirement can be found in the following services.

Vehicle and farm equipment repair and maintenance.
Principal contractors are responsible for VAT when they receive construction services from subcontractors.
Two parties working together to provide construction services.

Search VAT rates

Overview

It is possible to look for a certain product or service using the search box in the Value-Added Tax (VAT) rates database.

According to the VAT rates database, current practise is used to determine the tax treatment for VAT. Revisions in practise may necessitate revisions to the information.

Not to be taken as a law or as a substitute for doing your own research.

The Value-Added Tax Consolidation Act 2010 contains the rules for how products and services are assigned a VAT rating.

VAT rates database

Or browse A-Z

Current VAT rates

Current VAT rates
Date effective from Standard rate (%) Reduced rate (%) Second reduced rate (%) Livestock rate (%) Flat-rate compensation
percentage for Farmers (%)
1 January 2022      23     13.5           9      4.8             5.5
1 March 2021      23     13.5           9      4.8             5.6
1  January 2021      21     13.5           9      4.8             5.6
1 September 2020      21     13.5           9      4.8             5.4
1 January 2020      23     13.5           9      4.8             5.4

Historical VAT rates

VAT rates

Effective from    Standard   rate (%) Reduced rate (%)   Second   reduced rate   (%)   Livestock rate       (%)   Flat-rate addition    (%)
1    September 2020 21 13.5 9 4.8 5.4
1 January 2020 23 13.5 9 4.8 5.4
1 January 2019 23 13.5 9 4.8 5.4
1 January 2018 23 13.5 9 4.8 5.4
1 January 2017 23 13.5 9 4.8 5.4
1 January 2016 23 13.5 9 4.8 5.2
1 January 2015 23 13.5 9 4.8 5.2
1 January 2014 23 13.5 9 4.8 5
1 January 2013 23 13.5 9 4.8 4.8
1 January 2012 23 13.5 9 4.8 5.2
1 July 2011 21 13.5 9 4.8 5.2
1 January 2010 21 13.5 4.8 5.2
1 December 2008 21.5 13.5 4.8 5.2
1 January 2007 21 13.5 4.8 5.2
1 January 2005 21 13.5 4.8 4.8
1 January 2004 21 13.5 4.4 4.4
1 January 2003 21 13.5 4.3 4.3
1 March 2002 21 12.5 4.3 4.3
1 January 2001 20 12.5 4.3 4.3
1 March 2000 21 12.5 4.2 4.2
1 March 1999 21 12.5 4.0 4.0
1 March 1998 21 12.5 3.6 3.6
1 March 1997 21 12.5 3.3 3.3
1 March 1996 21 12.5 2.8 2.8
1 March 1993 21 12.5 2.5 2.5
1 March 1992 21 16 12.5 2.7 2.7
1 March 1991 21 12.5 2.3 2.3
1 March 1990 23 10 2.3 2.3
1 March 1989 25 10 5 2 2
1 March 1988 25 10 5 1.4 1.4
1 May 1987 25 10 1.7 1.7
1 March 1986 25 10 2.4 2.4
1 March 1985 23 10 2.2 2.2
1 May 1984 35 23 5,8,18 2 2
1 July 1983 35 23 5,18 2 2
1 May 1983 35 23 5,18 2.3 2.3
1 March 1983 35 23 5,18 2.3 2.3
1 May 1982 30 18 1.8 1.8
1 September 1981 25 15 1.5 1.5
1 May 1980 25 10 1 1
1 March 1979 20 10 1 1
1 March 1976 20 10 Discontinued Discontinued
1 March 1975 19.5 6.75 Suspended in relation to live cattle Suspended in relation to live cattle
3 September 1973 19.5 6.75 1 1
1 November 1972 16.37 5.26 1 1

Abolished, repealed VAT rates

Effective from Applied to radios, television sets,
record players and records*
Applied to passenger motor vehicles*
1 March 1976 40 35
1 March 1975 36.75 36.75
3 September 1973 36.75 36.75
1 November 1972 30.26 30.26

*The standard rate applied to these goods from 1 March 1979

Special rates

A special rate of 11.11% applied to dances from 1 November 1972 was abolished on 1 March 1976.

A special rate of 10% which continued in relation to domestic dwelling development contracts entered into before 25 February 1993 was repealed on 23 November 2010.