I propose to take Questions Nos. 39 and 58 to 60, inclusive, together.
Food supplement products are subject to the standard rate of VAT (23%). Shortly after the introduction of VAT, Revenue allowed the zero rate to be applied to certain food supplement products (vitamins, minerals and fish oils). This concessionary approach expanded as the market developed over the years and resulted in the zero rating by Revenue of further similar products, including products other than vitamins, minerals and fish oils.
Following complaints from the Irish Health Trade Association (IHTA), Revenue conducted a comprehensive review of the VAT treatment of food supplement products. Based on an expert report and its own legal analysis, Revenue concluded that the status quo was no longer sustainable and issued new guidance in December 2018 which removed the concessionary zero rating of various food supplement products with effect from 1 March 2019.
Following representation from Deputies and from the industry, I wrote to Revenue outlining my plans to examine the policy and legislative options for the taxation of food supplement products in the context of Finance Bill 2019. Revenue responded by delaying the withdrawal of its concessionary zero rating of the food supplement products concerned. This allowed time for my Department to carry out a public consultation on the taxation of food supplement products.
Based on this consultation, I introduced a provision in this year’s Finance Bill applying the reduced rate of VAT (13.5%) to food supplements from 1 January 2020. In the absence of this provision the standard VAT rate of 23% would apply to food supplements, including those that had been concessionally zero rated previously.
It is important to clarify that certain products will not be impacted by the legislative change. Foods for specific groups such as infant and follow-on formulae and infant foods, foods for special medical purposes and specially formulated foods will continue to be zero rated as they are well established and defined categories of food. Fortified foods, such as yoghurts and cereals fortified with vitamins and minerals, will also continue to be zero rated as they are food.
Folic acid, vitamin and mineral products which are licenced or authorised as medicines by the Health Products Regulatory Authority will continue to be zero rated under a different VAT provision for human oral medicines.