Dáil Éireann Debate, Tuesday - 9 May 2017
146. Deputy Barry Cowen asked the Minister for Finance his views on reducing the VAT rate on the construction of new apartments to reduce construction costs and stimulate new supply; and if his Department has had discussions with other Departments on same. [21939/17]
Amharc ar fhreagraEU VAT law, with which Irish VAT law must comply, does not in general allow the application of a reduced VAT rate on construction services. However, Ireland applies the 13.5% reduced rate of VAT to construction services under a derogation from the EU VAT Directive, because Ireland applied a reduced rate to such services on 1 January 1991.
The Programme for Partnership Government committed to ask the Oireachtas to consider the merits of a temporary targeted reduction of the rate of VAT from 13.5% to 9% on new, affordable houses and apartments, both public and private, timed to generate the maximum impact on supply and to target principally the purchasers of affordable homes.
In its June 2016 Report, the Oireachtas Committee on Housing and Homelessness reviewed the costs of construction including VAT, in the light of the Programme for Partnership Government commitment. They recommend that the Housing Agency annually review construction costs but did not recommend that the VAT rate on new residential property be reduced.
Ahead of last year's Budget I decided that relief would be better operated through the income tax rather than the VAT system, as applying the 9% VAT rate to the construction of new residential properties would involve having two separate VAT rates applying to construction services.
As the deputy will be aware, I also introduced the Help-to-Buy incentive in Budget 2017 to help encourage the building of additional new homes. That scheme will run until the end of 2019.
