Indirect Tax News - December 2019

Finance Bill 2019

Finance Bill 2019 was published on 17 October 2019. It contains a small number of VAT changes, the most notable of which we discuss below.

Food supplements

The Bill confirms that with effect from 1 January 2020 the VAT rate on food supplements will increase from zero to the reduced VAT rate of 13.5%. There are a number of products that will not be effected by this change, however, such as:

  • Foods for specific groups (essentially for vulnerable groups),
  • Vitamins and minerals, such as folic acid, licensed as medicines by the Health Products Regulatory Authority (HPRA), and
  • Fortified foods.

Last year the Irish Revenue sought to apply the standard VAT rate (23%) to food supplements but due to strong objections raised by concerned groups, that VAT rate increase was put on hold. The application of the reduced rate of 13.5% appears to be a compromise from the Irish Revenue’s initial plan to apply the standard VAT rate to such items.

Definition of ‘Qualifying Vehicle’

Accountable persons that acquire ‘Qualifying Vehicles’ that are used primarily for business purposes (at least 60%) can recover 20% (subject to their VAT recovery entitlement) of the VAT incurred on the hire or purchase of that ‘Qualifying Vehicle’.

The definition of ‘Qualifying Vehicle’ in the context of a right to a deduction of tax borne or paid will be amended to reflect the fact that motor vehicles that are first registered on or after 1 January 2021 will be subject to a lower co2 emissions threshold of less than 140g/km, while motor vehicles that are first registered on or after the 1 January 2009 and up to 31 December 2020 will continue to be subject to the current co2 emission threshold of less than 156g/km.

Inspection and removal of records

An amendment will also be made to Section 108 of the VAT Consolidation Act 2010. That section sets out the Irish Revenue’s rights in respect of inspection and removal of records. Irish VAT legislation will be amended to allow the powers contained in Section 108 to be used in respect of mutual assistance requests received by the Irish Revenue from other EU Member States under the provisions of Council Regulation 904/2010/EC on administrative cooperation and combating fraud in the context of VAT.

Deirdre Padian