Dáil Éireann Debate, Wednesday - 17 January 2024
334. Deputy Eoin Ó Broin asked the Minister for Finance if VAT applies to social and affordable housing funded by his Department and delivered by councils and approved housing bodies; and if, in those cases where VAT does apply, he will outline whether such charges could be waived to allow the delivery of social and affordable homes at lower cost. [57224/23]
View answerThe VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. A small number of categories in Annex III may have a zero rate of VAT applied. The supply and construction of housing, as part of social policy is listed in Annex III of the Directive and, therefore, can be subject to VAT at a reduced rate.
While under the EU VAT Directive the supply of construction services is liable to VAT at the standard rate generally across the EU, Ireland applies a 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive, again subject to strict restrictions. The Deputy will be aware that this derogated rate also applies on sales of new homes.
However under the VAT Directive it is not possible to waive VAT or apply a zero rate of VAT to social and affordable housing.
Technically, it would be possible for Ireland to decide, on social policy grounds, to apply the 9% reduced rate to the construction, repair and renovation of residential housing. However, in accordance with the Directive, such a decision would not be permitted in relation to housing built for reasons other than social policy. Such a situation would involve having two separate VAT rates applying to different housing areas. This could be very difficult to administer and would have the high risk of accidental or fraudulent underpayments of VAT. There is also no expectation or requirement that a VAT reduction would result in lower prices for consumers.
