Brian Cowen (Laois-Offaly, Fianna Fail)

I want to explain that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. The supply of telecommunications services is subject to the standard rate of VAT which in Ireland is set at 21%. The EU sixth VAT directive requires that such services are subject to the standard rate.

Under Irish law the charging of VAT on mobile telephone calls made and completed or initiated in another state is covered by section 5(5) of the Value Added Tax Act 1972, as amended, which transposes Article 9(1) of the sixth VAT directive. In this regard, Article 9(1) states:

The place where a service is supplied shall be deemed to be place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where s/he has his permanent address or usually resides.

Therefore, Irish suppliers of mobile phone services are liable to charge the Irish standard VAT rate of 21% on services provided to business and private customers, established or resident in the State, for their usage of those services anywhere in the world.

Senator Browne is referring to roaming services available to Irish mobile phone users which enable them to avail of that service anywhere in the world. In this regard, the provision of telecommunications services to mobile phone users is a contract between the customer and the provider of the service with whom they hold the contract. When a customer uses this service in Ireland, he or she is subject to the 21% VAT rate as the service is supplied wholly within the State. When a customer uses the service outside Ireland the contract remains with the Irish supplier and again is subject to the 21% VAT rate.

Roaming services are the subject of a contract between the supplier of the service here in Ireland and the telecommunications provider in the other country. At no stage does the supplier of the telecommunications service in the foreign country bill the customer directly. Instead, it bills the telecommunications company supplier in Ireland with whom the customer has the contract.

The Irish supplier is subject to Irish VAT on the total cost of providing the service to the customer, which includes any charges incurred outside the State. This would include the cost of the provision of the telecommunications service to its customer with whom it has a contract in Ireland. Therefore, an obligation to account for VAT on the total consideration is in accordance with Irish and EU VAT legislation.

For example, an Irish person having a contract with an Irish telecommunications provider may avail of that service anywhere in Europe. The service provider in Europe bills the Irish provider for the use of the service when the Irish customer uses the foreign service. The Irish customer only has a contract with the Irish provider and pays VAT at the rate proper to the Irish provider. At no stage is there any contractual agreement between the Irish customer and the foreign provider.

If Irish customers wish to avail of the VAT rates which apply in other countries, they would be required to enter into a contract with a service provider in that specific country. I hope this clarifies the matter for the Senator and provides him with an explanation at least of why the situation prevails.