Dáil Éireann Debate, Thursday - 5 October 2023
111. Deputy Michael Collins asked the Minister for Finance if, in budget 2024, all insulation products, for example, solar panels, attic insulation, wall insulation and foam insulation, will be VAT-free, thus enabling those on low incomes the opportunity to insulate their homes. [42056/23]
View answerAs the Deputy will be aware, it is a longstanding practice that the Minister for Finance does not comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
However, the VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate, unless they fall within categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT. Currently, Ireland has two reduced rates of 13.5% and 9%.
Following amendments to the VAT Directive in 2022 a limited number of zero rates may be applied by Member States to specific categories. One of these categories is solar panels, and in this regard the Deputy will recall that earlier this year, I introduced a zero rate for the supply and installation of solar panels in private dwellings. However, none of these categories include insulation or other construction material.
It should be noted that while insulation materials have the standard rate of VAT applied they have an effective rate of 13.5% VAT due to the 'two-thirds rule' which applies to construction. This rule means that if the cost of the goods used in carrying out work does not exceed two-thirds of the total price, the rate which applies to the service then applies to the entire transaction.
