Dáil Éireann Debate, Tuesday - 5 December 2023
194. Deputy Pauline Tully asked the Minister for Finance the reason VAT is charged on medicines for family pets; and if he has plans or will consider reducing or removing VAT on medicines for family pets. [53672/23]
View answerThe 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%. Member States can also apply a reduced rate lower than the 5% minimum and a zero-rate to certain categories in Annex III, including medicine.
Up until the amendments to Annex III of the Vat Directive in April 2022, medicines for animals could not be subject to a zero-rate. However because of a historical derogation, Ireland has been able to apply such a zero-rate to the supply of oral medicines for farm animals. This measure has always excluded medicines which are packaged, sold or otherwise designated for the use of dogs, cats, cage birds or domestic pets which remains liable at the standard rate.
With the aforementioned Annex III amendments, which now allow for a zero-rate for animal medicines, we have maintained our existing zero-rate for oral medicines for farm animals. In this regard, Revenue have published guidance on the VAT treatment of animal medicine which is available on the Revenue website www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Goods/vat-treatment-of-animal-medicines.pdf
While, it is now possible to zero rate medicines for family pets under the Annex III of the VAT Directive, no decision was made in Budget 2024 to do so. If such a measure was proposed it would form part of the normal Budget and Finance Bill process where the cost and impact could be considered.
The Deputy should note that as with other VAT rate reductions, while the VAT charged must always be correct a company can increase the base price of a product service so that the final consumer does not benefit from the VAT reduction. Consequently, therefore if such medicines were zero rated, there is no guarantee that this reduction would be passed onto consumers.
