Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Deputy. This section introduces a new section 92A to the VAT Consolidation Act 2010 which provides for the principles to govern the application of VAT in respect of the deposit return scheme, DRS. That scheme is being introduced by the Department of the Environment, Climate and Communications and is due to go live in February 2024.

The scheme requires that a refundable deposit is placed on single-use drinks containers – plastic bottles and aluminium drinks cans – and the deposit is refunded when the empty containers are returned for recycling or reuse. Under the environment legislation, the deposit is charged at each stage of the supply chain. It is added to the price of the goods by the person who first places the drink on the Irish market and on any subsequent sales. Once the drink has been consumed, if the container is returned, the deposit will be refunded.

Under existing VAT rules, VAT would apply to the deposit at each stage in the supply chain. However, this amendment introduces a new section 92A into VAT law so that VAT need only be accounted for on the deposits relating to unreturned containers. This tax treatment is possible on an exceptional basis in line with Article 92 of the VAT directive. Under the amendment, VAT will only apply to a deposit if the container is unreturned under the scheme, and it is the operator of the scheme who will be required to account for VAT on those deposits. This means that businesses in the supply chain, such as producers, wholesalers and retailers, will not charge VAT on the deposits and they will not have to account for VAT on deposits.

A consequential amendment is made to section 120 of the principal Act to allow Revenue to make regulations in relation to the details of the rules for accounting for the VAT, which will be done by the operator.