21st November 2025
Irish Revenue Announces Major VAT Reform Ahead of 2026 Rollout
The Irish Revenue Commissioners have unveiled a significant reform of the Value-Added Tax (VAT) payment and filing framework, introduced in mid-2025. This overhaul is a central component of Revenue’s wider digital modernisation programme and includes the phasing out of the long-standing Fixed Direct Debit system in favour of the Variable Direct Debit model. As part of this transition, many micro and small businesses currently filing annually will move to a bi-monthly VAT return cycle.
Revenue’s shift to the Variable Direct Debit approach reflects an effort to enhance accuracy and streamline payment processes. Under the former Fixed Direct Debit scheme, taxpayers were required to make estimated monthly payments and reconcile any under- or over-payments at year-end. In contrast, the new system automatically collects the precise VAT liability for each period. The outstanding amount will be debited directly around the third last working day of the month, reducing the likelihood of late payment interest while providing clearer financial visibility for businesses. In addition, the removal of previous eligibility restrictions means that all VAT-registered businesses—regardless of size—can now opt into payment by Direct Debit.
A key consequence of the new system is the mandatory move from annual to bi-monthly VAT filing for those transitioning from the FDD to the VDD structure. Businesses will benefit from improved cash-flow management and earlier access to VAT refunds, which will become available as soon as credits arise. Bi-monthly periods are the following:
- January-February,
- March-April,
- May-June,
- July-August,
- September-October, and
- November-December.
Reduced filing frequencies will remain available for smaller taxpayers meeting specific annual liability thresholds:
- Annual VAT Liability between €,3001 and €14,400 – Four-monthly returns are available.
- Annual VAT Liability €,3000 or less – Six-monthly returns are available.
The move to Variable Direct Debit and enhanced digital processes underscores Revenue’s commitment to reducing administrative burdens and supporting a more transparent, efficient compliance environment.
If your business may be affected by these changes, contact our team today for tailored guidance and support in preparing for the transition.
