On 26 May 2023, the Council of Ministers in Ireland took a significant step towards implementing changes to the Value Added Tax (VAT) system. They approved a preliminary draft law that contains various provisions on VAT. This move is aimed at bringing about improvements and adjustments to the existing VAT regulations in the country.
After obtaining the advice of the Council of State, the government has now submitted the preliminary draft to the House of Representatives. This marks an important milestone in the legislative process, as it paves the way for further discussions and potential amendments to the proposed changes. The draft law, identified as Parl.St. Chamber 2022-23, No. 55-3569/001, will now undergo a thorough examination by the parliamentarians.
One of the key provisions included in the preliminary draft law is the extension of the list of authorised goods for VAT warehouses. This extension aims to encompass a wider range of products that can be stored in VAT warehouses, thereby facilitating smoother trade operations and reducing administrative burdens for businesses.
Another notable provision in the draft law is the obligation for mixed and partial taxable persons to report VAT deduction ratios. This requirement aims to enhance transparency and improve the accuracy of VAT reporting for businesses that engage in both taxable and non-taxable activities. By providing detailed information on VAT deduction ratios, these businesses can ensure compliance with the VAT regulations and avoid potential penalties.
The preliminary draft law also includes some technical adjustments related to VAT identification numbers. These adjustments aim to streamline and simplify the process of obtaining and using VAT identification numbers, making it easier for businesses to comply with their VAT obligations.
In addition, the draft law proposes an extension of joint and several liability for platforms. This measure aims to address the issue of tax evasion and non-compliance by online platforms. By extending the liability to these platforms, authorities can hold them accountable for any VAT obligations that arise from transactions facilitated through their platforms. This is expected to enhance tax collection and create a level playing field for all businesses operating in the digital economy.
The draft law also seeks to harmonize the limitation period in the event of fraud for both VAT and direct taxation. This harmonization aims to ensure consistency in the treatment of fraudulent activities, regardless of the type of tax involved. By aligning the limitation period, authorities can effectively investigate and prosecute cases of tax fraud, thereby deterring potential offenders and safeguarding the integrity of the tax system.
Furthermore, the draft law proposes an extension of the data retention period for payment service providers participating in the Centralized Exchange of Service Providers (CESOP) system. This extension aims to enhance the effectiveness of tax control measures by allowing authorities to access relevant data for a longer period of time. By retaining this data, authorities can identify potential irregularities or non-compliance, leading to more accurate tax assessments and improved enforcement of VAT regulations.
The preliminary draft law also addresses the reduced VAT rate for medicinal products. It provides additional clarification on the description of medicinal products and medical devices, ensuring that the reduced VAT rate is applied appropriately. This clarification aims to prevent any ambiguity or misinterpretation in the application of the reduced VAT rate, thereby promoting fairness and consistency in the taxation of these essential healthcare products.
Another significant provision in the draft law relates to institutions with social objectives. The proposed changes introduce new general criteria for determining the eligibility of these institutions for reduced VAT rates. By establishing clear criteria, the draft law aims to ensure that institutions with social objectives receive the appropriate VAT treatment, reflecting their societal contributions and promoting their sustainability.
Lastly, the draft law includes a provision that expands the reduced VAT rate for “working in immovable property” to care institutions. Previously, care institutions had to meet certain requirements, such as providing 24-hour care, to qualify for the reduced VAT rate. However, the draft law now stipulates that “day care” is sufficient to be eligible for the reduced rate. This change aims to promote accessibility to care services and align the VAT treatment of care institutions with their actual services provided.
In conclusion, the approval of the preliminary draft law on VAT provisions by the Council of Ministers marks a significant step towards improving and adjusting the VAT system in Ireland. The proposed changes aim to enhance transparency, streamline processes, and promote fairness in the taxation of goods and services. The draft law will now undergo further scrutiny and discussion in the House of Representatives, where parliamentarians will have the opportunity to propose amendments and ensure that the final legislation meets the needs and expectations of businesses and taxpayers in Ireland.
