The Insolvency Service of Ireland has confirmed that a VAT rate of 23% will be applied to the fees paid to insolvency practitioners.
The service, which will regulate the work of Personal Insolvency Practitioners (PIPS), was established in March.
The Independent Mortgage Advisers Federation has criticised the application of VAT, saying it will make the insolvency process more expensive.
"This will cause concern for both debtors and creditors," said Michael Dowling.
Mr Dowling said: "Ultimately, this is going to impact on the cost on the process. The loss element that the banks will have to absorb will also be higher.
"In the UK they've had 20 years of this type of arrangement but they've deemed it not a 'vat-able' transaction".
Karl Deeter of Irish Mortgage Brokers said: "The State shouldn't be the beneficiary of people going bust".
"People looking to work out their debts need to have enough money in their pot to pay an insolvency practitioner. What about those people who don't have enough to go to a practitioner?"
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