Michael Healy-Rae
Ceist:402. Deputy Michael Healy-Rae asked the Minister for Finance if there are plans to change the VAT rate for green diesel (details supplied); and if he will make a statement on the matter. [43660/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (402)
Freagraí scríofa
I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate, unless they fall within categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT. Within its rates structure, the EU VAT Directive also allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Currently Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Ireland also holds a number of derogations, under which is it permitted to retain some historic VAT arrangements, under strict conditions.
Ireland has retained its historic application of one of the reduced rates of VAT, 13.5%, to the supply of marked gas oil (commonly known as green diesel). This is a ‘parked rate’, governed by Article 118 of the VAT Directive, and standstill provisions from 1991 mean that this reduced rate can be maintained but it cannot be reduced below 12%.
The Deputy may be interested to know that VAT-registered businesses, including fishers, farmers and contractors, are entitled to recover the cost of VAT on the purchase of green diesel, used in the course of their business, as is the case with most business costs.
Fishers and farmers who decide to remain unregistered for VAT can avail of the Flat-Rate Scheme. The Scheme sets out a percentage amount, known as the flat-rate addition, which unregistered fishers and farmers apply to their prices when selling goods and services to VAT-registered businesses. The VAT-registered business treats the flat-rate amount as a normal business input in its periodic VAT return, claiming input credit for the flat-rate amount paid to the flat-rate fisher or farmer. In this way, fishers and farmers are compensated for the VAT incurred by them on their input costs including green diesel, and this simplification reduces the administrative burden for them as there is no need to register for VAT to recover VAT incurred on their inputs.