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

I thank Deputy Crowe. 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.

Currently, Ireland has two reduced rates: 13.5% and 9%. Member states can also apply a reduced rate lower than the 5% minimum and a 0% rate to certain categories in Annex III, namely supplies covered by categories 1 to 6 and 10c, which include foodstuffs, including beverages but excluding alcoholic beverages. On this basis, the 0% rate of VAT applies to food and drink – for example, flour, bread, pasta, cereals, butter, eggs, tea, sugar, meat, fish, milk and vegetables, fresh or frozen. Foods for special medical purposes for use under medical supervision to manage specific medical conditions, diseases or disorders are also zero-rated. However, certain food items are specifically excluded from the 0% rate of VAT and are liable to either the reduced VAT rate of 13.5% or the standard rate of 23%. Included are biscuits, cakes, savoury snacks and confectionery products. Gluten-free products are treated the same way as their standard equivalents.

EU law provides that reduced rates of VAT can be selective and restricted to “concrete and specific aspects” of a category in Annex III, provided this does not infringe on the principle of fiscal neutrality. This principle requires that similar products be treated in the same manner for VAT purposes. As such, similar products, such as a “normal” biscuit and a gluten-free biscuit, cannot be rated differently. Therefore, if a particular rate is applied, whether standard or reduced, it must be applied to all similar biscuit products. As such, any VAT rate reduction given to gluten-free food products, such as gluten-free biscuits, cakes, savoury snacks and confectionary, would also have to apply to their standard equivalents. However, this rule also means certain gluten-free products, such as flour, bread, pasta and cereals, are already zero-rated.

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