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Tax Code

Dáil Éireann Debate, Tuesday - 6 July 2021

Tuesday, 6 July 2021

Questions (163)

Seán Canney

Question:

163. Deputy Seán Canney asked the Minister for Finance if he will reduce the VAT rate on construction works from 13.5% to counteract the increases in costs experienced by first-time buyers; and if he will make a statement on the matter. [35856/21]

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Written answers

The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. Under the EU VAT Directive it is not permissible to differentiate between the supply of different types of residential property, such as apartments and housing, for the purpose of applying VAT rates. Nor is it possible to change the VAT rate for first-time buyers.

While most Member states apply the standard rate to construction services, Ireland already applies a 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive.

I am advised by the Revenue Commissioners that under the EU VAT Directive and Irish VAT legislation the supply of building materials is liable to VAT at the standard rate, currently 23%. Member states are not permitted to apply a VAT rate lower than the standard rate to building materials. However, Ireland by way of derogation from the general rule is permitted to continue to apply a reduced rate, currently 13.5%, to the supply of ready-to-pour concrete and certain concrete blocks.

Property developers charge VAT on sales of developed residential property at the 13.5% rate but are entitled to recover the VAT incurred in the development of that property, including VAT on building materials. As such, a reduction in the rate of VAT on building materials would not reduce building costs.

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