Damien English (Meath West, Fine Gael)
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Question 163: To ask the Tánaiste and Minister for Finance the plans he has to remove VAT from solar panels for houses and from the cost of installation of solar panels. [25052/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy will be aware that the Programme for Government contains a commitment to examine the scope within EU law for reducing the VAT rate on environmental goods and services generally from the standard VAT rate of 21 per cent to the reduced rate of 13.5 per cent. This and other measures under the Programme for Government clearly demonstrate the Government's commitment to addressing the environmental challenges which we face.

As regards the specific point in relation to solar panels, the position is that the VAT treatment of goods and services is governed by EU law with which Irish VAT law must comply. While we can retain the zero rating provisions which were in existence on 1 January 1991, we cannot introduce any new ones. Therefore, it is not possible to apply a zero rate to the supply or installation of solar panels. In addition, while a reduced rate can be applied to certain goods and services, there is no mechanism which would allow for the reduced rating of such systems. The sale of solar panels products is therefore chargeable at the standard VAT rate of 21%.

However, I understand that since solar panels are more likely to be supplied and installed under a single contract, the reduced rate of VAT of 13.5 per cent may apply to the entire contract subject to what is referred to as the 'two-thirds' rule. Under this rule, the reduced rate of VAT applies if the VAT-exclusive cost of the goods to the supplier does not exceed two-thirds of the overall VAT-exclusive charge made to the customer in respect of the supply and installation of these goods.

The reduced rate of VAT also applies where new premises are sold with energy systems already installed as the price paid for a premises (which is liable to the reduced rate of VAT of 13.5 per cent) is deemed to include all fixtures. In addition, where solar panels are purchased by VAT registered commercial enterprises, any VAT charged may be reclaimed by them, insofar as the equipment in question is used for business purposes.

Damien English (Meath West, Fine Gael)
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Question 164: To ask the Tánaiste and Minister for Finance if he has given additional thought to introducing a tax break scheme that would encourage the provision of community facilities by individuals or business entities for voluntary community groups; and if he will make a statement on the matter. [25053/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have no plans to introduce any further tax breaks along the lines suggested by the Deputy. However, as the Deputy may be aware, Section 848A of the Taxes Consolidation Act 1997 provides tax relief on donations made by either individuals or corporate bodies to eligible charities and other approved bodies including first and second level schools and third level institutions including universities. An eligible charity is any charity in the State which has been granted exemption from tax for a period of not less than two years and which is authorised by the Revenue Commissioners for the purpose of the scheme.

In addition, Section 847A of the Taxes Consolidation Act 1997 provides tax relief for donations to certain sports bodies for the funding of capital projects. Eligibility for the relief centres on two key criteria; the sports body must be an Approved Sports Body and the donation must be for the purposes of an Approved Project. To be regarded as an Approved Sports Body, it must obtain two separate statements from the Revenue Commissioners:

a valid tax clearance certificate, and

a statement that, in accordance with section 235 of the Taxes Consolidation Act 1997, the body is exempt from tax because it is established solely for the purpose of promoting athletic or amateur games or sports and its income is applied solely for that purpose.

Approved Projects are capital projects approved for the purpose of the scheme by the Minister for Arts, Sport and Tourism. The approval verifies that the claim is made in respect of genuine sports capital projects.

The types of projects which are eligible to be approved are as follows:

the purchase, construction or refurbishment of a building to be used for sporting or recreational activities,

the purchase of land for such activities,

the purchase of permanently based sports equipment (excluding personal equipment), and

the improvement of pitches and playing surfaces etc.

The estimated aggregate cost of the project must not exceed €40 million. The minimum qualifying donation for relief purposes to an eligible charity or an approved project is €250 per annum and there is no upper limit on the amount which can be donated. The relief on the donation will be at an individual's marginal rate of tax.

The arrangements for allowing tax relief on donations depend on whether the donor is a PAYE taxpayer or an individual on self-assessment or a company. For a PAYE taxpayer, the relief is given at the donor's marginal rate of income tax and is given on a grossed-up basis to the sports body. In the case of a donation made by an individual who is self-assessed, the individual claims the relief and there is no grossing-up arrangement. Similarly, in the case of companies, they can claim deductions for donations as if they were a trading expense.