Dáil Éireann Debate, Tuesday - 13 February 2024
229. Deputy Jim O'Callaghan asked the Minister for Finance the reason karate, judo and other martial arts are vatable at 23% whilst fitness classes have a reduced rate; and if he will make a statement on the matter. [6197/24]
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 the 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. The EU VAT Directive also allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Currently Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Ireland is also permitted to retain some historic VAT arrangements, under strict conditions.
The reason that a reduced rate of VAT applies to services consisting of the care of the human body supplied in the course of a health studio business or similar business, such as a yoga studio, is on the basis of a historical derogation. In the absence of this derogation, these business would have paid the standard 23% rate of VAT.
Following changes to the VAT Directive in 2022 a Member State may apply a reduced rate to the supply of sport or physical exercise classes. The Deputy should note while I did give the matter some consideration, no decision was made in Budget 2024 to reduce the VAT rate on sports and fitness classes.
I decided, on balance, that there would be challenges in determining how it would be defined in such a way as to avoid one type of activity having an advantage over another and thus be in breach of the principle of fiscal neutrality. For instance it would be challenging to provide a reduction on the basis of age or type of class.
The Deputy should note that when sports or fitness classes are provided by companies or sole traders who are not registered for VAT because they operate below the VAT registration threshold no VAT is charged.
Finally, as with other VAT rate reductions it should be noted that while the VAT charged must always be correct a company can increase the base price of the service so that the final consumer does not benefit from such a reduction
