I propose to take Questions Nos. 80 and 146 together.
Although there are currently no measures in Irish VAT or Excise legislation that relate to reliefs for armed forces from another state, there are provisions in EU VAT and Excise legislation that are applicable notwithstanding that the measures have not been transposed into Irish legislation.
In respect of VAT, the provision in question is Article 151(1)(d) of the VAT Directive. This provides that the supply of goods or services to another Member State shall be zero-rated for VAT purposes where that supply is intended for the use of armed forces of any state party to NATO other than the Member State of destination itself. Such supplies include supplies to messes and canteens. VAT is a self-assessed tax and it is not known if any supplies have been zero rated on the basis of this provision. Supplies to other Member States and exports to third countries are generally zero rated in any case.
In respect of Excise, the provision in question is Article 12 (1)(c) of the General Excise Directive. This provides that excise goods, which relates to alcohol, tobacco and mineral oil products, shall be exempted from payment of excise when they are intended to be used by the armed forces of any state party to NATO when based in an EU Member State, other than the armed forces of the EU Member State itself. As liability to excise duty arises when excise goods are released for consumption in the State and as no armed forces of another State have been based here at any time, the question of the use of this provision has not arisen.
Both the VAT and the Excise provisions mentioned have been in place since 1993 and are already applicable to Ireland. Measures to transpose these provisions have been included in Finance Bill 2020 as Ireland has a legal requirement to ensure that our national legislation on VAT and Excise is correctly aligned with the EU Directives. This is notwithstanding the fact that there is no change to the constitutional provisions relating to armed forces which effectively prohibit foreign forces being based or maintained within the State. These measures relate to the VAT and Excise treatment of supplies only and do not impact on Ireland’s policy of military neutrality or any other policy in relation to defence.
A further Council Directive which was enacted in 2019, Council Directive 2019 / 2235, contains a number of measures in respect of EU defence efforts which will take effect from 1 July 2022 and will be binding on all EU Member States, including Ireland. The purpose of these measures is to align the VAT and Excise treatment for EU forces, undertaking a common defence effort under the common security and defence policy of the EU, to the current VAT and Excise treatment in place for NATO forces. The transposition of these measures into Irish legislation is also included in Finance Bill 2020. These provisions will have an extremely limited application, if any, and will not give rise to any cost to the exchequer.
As these articles do not impact on Ireland's neutrality I did not seek a derogation for Ireland.