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Dáil Éireann Debate, Wednesday - 19 January 2022

Wednesday, 19 January 2022

Questions (302)

Christopher O'Sullivan

Question:

302. Deputy Christopher O'Sullivan asked the Minister for Finance if consideration will be given to reducing the VAT on building supplies to help with the cost of building new homes; and if he will make a statement on the matter. [63286/21]

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Written answers

I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply.  Under the EU VAT Directive and Irish VAT legislation the supply of building materials is liable to VAT at the standard rate, which in Ireland is currently 23%.  In general, Member states are not permitted to apply a VAT rate lower than the standard rate to such supplies.  By way of special derogation from the general rule, however, Ireland is permitted to continue its long-standing practice of applying a reduced rate, currently 13.5%, to the supply of ready-to-pour concrete and certain concrete blocks but there are strict restrictions on this derogation, including that the rate cannot be reduced below 12%.

In relation to the supply of construction services, most Member States apply the standard rate of VAT whereas Ireland applies its 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive.

It is important to note that while the suppliers of new homes are required to charge VAT on sales of new homes at the reduced 13.5% rate, they are generally entitled to full recovery of any VAT incurred in the development of that property, including for example VAT at the standard rate on building materials used. This means that , even if it were permitted by the Directive, a reduction in the rate of VAT on building materials would not lead to a reduction in the cost of supplying new homes because the VAT charged on the materials and services used in construction is already recoverable by the suppliers of the homes.

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