I am advised by the Revenue Commissioners that the transport of passengers and their accompanying baggage is exempt from VAT under Paragraph 14(3) of Schedule 1 to the Value-Added Tax Consolidation Act 2010. Accordingly, the provision of a taxi service is exempt from VAT.
The provider of a service that is exempt from VAT does not charge VAT on the service and is not entitled to deduct, or claim a refund of, any VAT incurred on goods and services used for the purposes of the exempt supplies. Thus, a person who provides a taxi service does not register for VAT and cannot recover VAT incurred on any goods and services, including a motor vehicle, used for the purposes of the person's taxi business. I would add that, in any event, Section 60(2)(a)(iv) of the Value-Added Tax Consolidation Act 2010 provides that, in general, a taxable person has no entitlement to deduct VAT incurred on the acquisition of a passenger motor vehicle, except where it is acquired as stock-in-trade or for use in a vehicle hire or driving school business.