VAT Update

Changes to the 9% VAT Rate

From 1 January 2019, the 9% VAT rate is increased to 13.5% on certain supplies of services including hotel and other holiday accommodation, catering and restaurant services, hairdressing, cinema tickets etc.

The 9% VAT rate has been retained for sporting activities and the supply of newspapers and other periodicals. The 9% rate will also apply to the supply of e-publications such as books, newspapers and periodicals supplied electronically. Certain items are excluded from the definition, which relate to advertising, audible or video content.

VAT on Supplements

Revenue have confirmed that a concession applying the zero percent VAT rate to certain types of vitamins, minerals and fish oils will no longer apply. From 1 March 2019, the standard rate of 23% will apply to supplements such as vitamins, slimming aids, sports nutrition food supplements etc. The zero percent rate of VAT will continue to apply to medicines and products licensed by the Health Products Regulatory Association (HPRA).

This will have a significant impact on businesses suppling such products as this could equate to an effective 23% increase in the price of such products for customers. This may prove difficult for suppliers to pass on to customers.

Compensation scheme for charities

In Finance Act 2017, the Government introduced a Value Added Tax (VAT) Compensation Scheme for Charities which aims to compensate charities for VAT incurred on expenditure on or after 1 January 2018. The level of refund is restricted in proportion to the level of non-public funding the charity received. A capped fund of €5 million in total is available for VAT refunds to charities and there will be a review of the scheme after three years. If total claims exceed €5 million, the individual claims will be paid on a pro-rata basis.

The scheme will see the compensation paid one year in arrears. Charities can submit one claim per year which should relate to VAT paid in the previous year only. The minimum claim amount that can be submitted is €500. Claims can be submitted between 1 January and 30 June each year. For example, VAT paid on expenditure in 2018 can be claimed between 1 January and 30 June 2019. The facility to make claims under the scheme is available on ROS from January 2019 and it is expected that approved repayments will issue in November in the year of the claim.

To qualify for the scheme, the charity must, now and at the time that the qualifying expenditure was incurred:

  • be registered with Revenue and hold a charitable tax exemption 
  • be registered with the Charities Regulatory Authority (CRA).

The charity should also ensure they have a current tax clearance certificate before submitting a claim.

Any charities that wish to make a VAT refund claim or would like more information in relation to the scheme should speak with their RBK tax advisor.

Transfer of Business (TOB) relief in respect of transfer of Immovable Property

When buying or selling property it is important to consider the VAT implications and ensure the appropriate VAT clause is included correctly in the contract of sale. TOB is a VAT relieving provision that facilitates transfers of real estate. Up until recently, where a VAT registered person was purchasing property, which had previously been let at any stage then Revenue accepted that TOB could apply. Accordingly, if the property was “new” VAT was deemed to have applied on the sale price and if the property was an “old property” the purchaser took over the remaining VAT capital good obligations of the vendor.

Revenue have recently updated their guidance notes in relation to the application of TOB provisions to property transactions. The new Revenue guidance requires that in order for TOB to apply there must be a current letting or agreement for letting in place. If the property is vacant on sale then TOB may not apply and further analysis is required to determine the applicable VAT treatment. This narrows the scopes for the operation of TOB for immovable property.

Return to Tax Issue - Spring 2019

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Ronan McGivern

Taxation Partner

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