Travel agents are to be given the option of providing a credit note to customers in lieu of refunds.
Transport Minister Shane Ross says he has received Government approval for the proposals.
A refund credit note can be issued for package holidays booked through Irish registered travel agents and tour operators.
This will be guaranteed by the State in the event that the travel agent or tour operator becomes insolvent.
These notes can be offered by travel agents and tour operators to their customers in circumstances where they are not able to provide a cash refund or a full cash refund.
The refund credit note can be to the value of all of the refund due, or part of the refund alongside part cash.
It will be redeemable for its cash value after six months, and can be used to book a replacement holiday at any stage.
Minister Ross said these are "very difficult days for consumers" who have booked holidays and for the tourism industry.
But he said the refund credit note is an attempt to "strike a balance" between preventing sector-wide bankruptcy and consumer rights.
Minister Ross said: "The travel restrictions imposed across the world in response to the COVID-19 pandemic have led to the widespread cancellation of holidays during March, April and May, with many people having to postpone holiday, wedding and honeymoon plans.
"Under the EU Travel Package Directive, people who have had to cancel such bookings because of the COVID-19 travel are entitled to a cash refund, and that entitlement will continue to apply.
"However, it is also the case that many travel agents and tour operators are having severe cash flow problems, and it is not clear that all of them will be able to meet all of their current cash refund obligations and at the same time be able to stay in business."