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Charitable and Voluntary Organisations

Dáil Éireann Debate, Thursday - 1 July 2021

Thursday, 1 July 2021

Ceisteanna (204)

Richard Boyd Barrett

Ceist:

204. Deputy Richard Boyd Barrett asked the Minister for Finance the VAT implications for a registered charity building an animal shelter as a new build; if exemptions are available on the VAT; and if he will make a statement on the matter. [35448/21]

Amharc ar fhreagra

Freagraí scríofa

I am advised by the Revenue Commissioners that the rules on VAT are subject to EU VAT law, with which Irish VAT law must comply. VAT is charged on the supply of goods and services, and taxable entities must register for the tax, and pay VAT in respect of the goods and services that they supply to their customers, with a deduction for the VAT on their inputs and purchases. It is a fundamental feature of the EU and national arrangements that the liability to VAT depends on the nature of the goods and services being supplied; it does not differ according to the circumstances of a particular customer or purchaser.

Under the EU VAT Directive, non-profit groups that are engaged in non-commercial activity are either exempt from VAT or outside the scope of the tax; this means that they do not register for VAT, they do not have to pay VAT on the goods or services they provide, and, by extension, they cannot recover the VAT they have incurred on their inputs and purchases.

Where an organisation acquires or builds a new facility such as an animal shelter, then the price it is charged by its suppliers (e.g. for the construction and fit-out) would normally include VAT. In the type of circumstances referenced by the Deputy, where the organisation is a charity that is probably exempt from VAT, then the organisation would not have the possibility to recover the VAT that it incurs in getting the new facility. Such non-recovery is a general feature of VAT exemption and there is no provision in either European law or Irish VAT law that would allow for VAT recovery or for having the transaction excluded from VAT.

Finally, the Deputy may be interested to know that – separate to the tax code – since 2018 there is a grant scheme under which charitable organisations can apply for a payment from an annual €5m grant fund, based on the level of VAT costs that they have incurred, and based on the proportion of their funding which comes from non-public sources. Claims can be submitted annually by charities that are registered with the Revenue Commissioners, hold a charitable tax exemption (CHY) under s207 Taxes Consolidation Act (TCA) 1997, and are registered with the Charities Regulatory Authority (CRA). Additionally, they must hold a Tax Clearance Certificate and be in possession of a set of audited accounts for a financial year which ends no earlier than in the calendar year to which the claim relates.

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