Some of the key changes relating to indirect taxes in Finance Bill 2018, as initiated, are outlined below:
VAT Rate applicable to Tourism and Hospitality sector
The most controversial change relating to VAT has been the increasing of the “tourist VAT rate” to 13.5%. By way of background, on 1 July 2011, the second reduced VAT rate of 9% was introduced as a temporary measure as part of an employment initiative to create additional jobs in the tourism and restaurant sector.
From 1 January 2019, the majority of goods and services currently supplied at 9% will increase to 13.5%, with the exceptions being the provision of sporting facilities and the supply of newspapers and other periodicals.
VAT Rate on the Supply of Live Horses and Greyhounds
Albeit the 9% rate was not extended to the supply of live horses and greyhounds in 2011 (it was extended in 2015 following the decision of the Court of Justice of the European Union in C-108/11, Commission v Ireland), the increased rate of 13.5% has been confirmed as also applying to both horses and greyhounds. The 4.8% rate continues to apply to the sale of horses for use in foodstuff production or in agricultural production. The flat-rate addition remains unchanged at 5.4% and it continues to apply to the sale of horses by flat-rate farmers as agricultural produce.
VAT Rate on Electronic Publications
Following recent agreement among EU Finance Ministers to allow member states to apply reduced VAT rates to publications supplied electronically, the VAT rate on electronic newspapers and e-books will be reduced from 23% to 9% with effect from 1 January 2019.
There is an exception where the electronic publication is wholly or predominantly devoted to advertising, or consists wholly or predominately of audible music or video content, and such publications will still be subject to VAT at 23%.
Interestingly, the supply of printed books and booklets are subject to VAT at the zero rate.
Changes to the Vehicle Registration Tax (VRT) regime
Increase in rate of VRT to certain vehicles
A 1% increase has been introduced in the Bill to the rate of VRT on the registration of diesel passenger cars and light commercial vehicles in the various CO2 emissions bands.
The VRT rates applying to non-diesel, diesel hybrid and plug-in hybrid vehicles have not been amended.
Extension of VRT reliefs
The Bill provides for an extension of VRT reliefs for electric, hybrid-electric and plug-in hybrid electric vehicles until 31 December 2019.
The Bill also introduces two VRT changes that were not alluded to in this year’s Budget.
- The first eliminates the repayment scheme for the VRT element of the VAT reclaimed by businesses carrying on the business of leasing or hiring vehicles or the instruction in the driving of vehicles. This change will come into effect for any cars registered from 1 January 2019 and repayment claims no longer will be processed by the Revenue from 1 April 2019. Prior to this amendment, such businesses were permitted to reclaim the VRT portion of the VAT, albeit subject to certain conditions.
- The second is a newly established system which allows for the proportionate payment of VRT on passenger vehicles and light commercials leased from another EU member state and brought into Ireland for the period of the lease. Certain conditions must be met in order to qualify for proportionate payment:
- the vehicle has not been previously registered in Ireland;
- the lease period is between one month and four years;
- the vehicle leaves the state once the lease period has finished;
- the leasing company is registered for VAT in Ireland and holds a tax clearance certificate; and,
- the vehicle is registered in the name of a person established in the state.
This particular change is a positive development as it should make the internal market more competitive for service providers from other EU member states.
Sugar Sweetened Drinks Tax
To comply with a commitment made as part of the EU state aid notification process, certain categories of drinks, i.e. certain milk substitute drinks and drinks containing milk fats, will be subject the sugar sweetened drinks tax where they do not meet a minimum calcium content of 119 milligrams per 100 millilitres. This change takes effect on 1 January 2019.