I propose to take Questions Nos. 74 and 75 together.
The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply.
Under the Directive the supply of construction services is generally liable to VAT at the standard rate. However, by way of special derogation from the general rule, Ireland is permitted to continue to apply a reduced rate, currently 13.5%, to the supply of all construction services.
There are no provisions under the Directive or Irish legislation to permit the application of a VAT exemption to the supply of construction services based on the status of the customer. Where a person makes a supply of construction services to another party those services must be charged to VAT at the appropriate rate. This is so even where the VAT due on those services must, in accordance with legislation, be accounted for by the recipient of the services (under the reverse charge system), rather than the supplier, and regardless of whether the recipient of the services is a public body.
A person who receives construction services, including a local authority, may reclaim the VAT on construction costs incurred where the construction services are acquired and used for the purposes of the recipient’s taxable activities.