Dáil Éireann Debate, Tuesday - 24 April 2018
133. Deputy Michael McGrath asked the Minister for Finance the status of the application of VAT to a product (details supplied); and if a reduced rate or zero rate of VAT can be applied to the product without impacting the VAT treatment of other classes of products. [17955/18]
View answerI am advised by the Revenue Commissioners that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. The EU VAT Directive provides that Member States may apply either one or two reduced rates to certain goods and services listed in Annex III of the Directive, including the supply of goods and services intended for use in agricultural production. Ireland currently operates two lower rates of VAT, 13.5% and 9%, as permitted by the EU VAT Directive. In addition, the VAT Directive allows for historic VAT treatment to be maintained under certain conditions and Ireland had retained the application of the zero rate of VAT on certain goods and services but is prohibited from extending or applying this rate to other goods or services such as plastic for wrapping silage bales or silage making.
Currently, under Irish legislation, the standard rate of VAT, 23%, applies to the supply of plastic for wrapping silage bales (supply of a good) and the reduced rate of VAT, 13.5%, where the wrapping is supplied in the course of the agricultural service of silage making (supply of a service). VAT on wrapping for silage bales can be recovered by VAT registered agricultural contractors, who in turn charge VAT at 13.5% on the supply of their silage making services to farmers. VAT registered farmers are entitled to recover this and other VAT borne on their input costs, while flat rate farmers are compensated for the VAT borne on their input costs through the flat rate addition applied to their supplies. The VAT borne on silage making and other expenses associated with agricultural production are included in calculating the amount of the flat rate addition each year.
