Dáil Éireann Debate, Thursday - 21 January 2021
74. Deputy Ged Nash asked the Minister for Finance the relief that local authorities can seek in regard to their obligation to pay VAT and tax as a local Government body (details supplied); his views on whether some form of VAT relief for local authorities is required given that they are currently being charged VAT for services, including the construction of council owned homes; and if he will make a statement on the matter. [3238/21]
Amharc ar fhreagra75. Deputy Ged Nash asked the Minister for Finance his plans to put in place a VAT exemption or claim system for local authorities, given that the application of VAT is prohibiting the construction of affordable social homes; and if he will make a statement on the matter. [3239/21]
Amharc ar fhreagraI 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.
