When you supply both goods and a service together for one price, Ireland has a specific rule to determine whether the whole thing is taxed as goods or as a service.
Last updated: June 2026
When a business supplies goods and a service together for a single, undivided price (for example, a hairdresser supplying and applying hair product, or a caterer supplying food and serving it), Ireland’s Two-Thirds Rule determines how to classify the whole transaction for VAT purposes. If the value of the goods supplied is more than two-thirds of the total price, the entire supply is treated as a supply of goods. If the goods make up two-thirds or less, the entire supply is treated as a supply of services.
The classification affects which VAT registration threshold applies (€40,000 for services vs €80,000 for goods) and potentially which VAT rate applies, since goods and services can carry different rates depending on what’s being supplied. Getting this classification wrong can mean registering too late (if you assumed the higher goods threshold applied when the service threshold actually did) or applying the wrong rate on invoices.
A restaurant serving a meal is generally treated as a service (given the significant service element relative to the raw food cost), while a business primarily selling a physical product with minor installation or delivery included would generally be treated as a goods supply if the goods value clearly exceeds two-thirds of the price. Genuinely mixed businesses should assess each type of combined supply individually rather than assuming one blanket classification.
No, it specifically applies where goods and a service are supplied together for a single undivided price — businesses that sell goods and services as clearly separate, separately priced items don’t need to apply this rule.
Whichever the calculation determines — if goods exceed two-thirds of the price, the goods threshold (€80,000) applies to that supply; otherwise the services threshold (€40,000) applies.
For businesses with consistent, similar transactions, the classification is typically stable, but genuinely mixed or varied businesses should periodically reassess, especially if their cost structure changes.
If they’re genuinely separate supplies with separate pricing, the Two-Thirds Rule generally doesn’t apply — each supply is assessed on its own terms instead.
Given the potential impact on your registration threshold and VAT rate, it’s worth a one-off consultation with an accountant if your business involves genuinely mixed goods-and-service supplies.
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