James Bannon (Longford-Westmeath, Fine Gael)
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Question 166: To ask the Minister for Finance if Ireland is in compliance with EU regulations in having different and higher rates of VTR and VAT on imported used cars than on new vehicles as based on our nationally compiled figures rather than the actual figures paid to the seller and for the vehicle; if not, the reason for same; and if he will make a statement on the matter. [22691/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised by the Revenue Commissioners that, in so far as both vehicle registration tax (VRT) and VAT are concerned, the same rates of VRT and VAT (where VAT is chargeable on used vehicles) are applied to both new vehicles and imported used vehicles. Accordingly, Ireland is fully compliant with EU regulations relating to VAT and VRT payable on the registration of vehicles in the State.

VRT is currently based on engine size and is charged on the open market selling price (OMSP) of the vehicle in the State. The Deputy is no doubt aware that from 1 July 2008, the registration of category A vehicles (passenger vehicles) will be based on the level of CO2 emissions for a vehicle.

OMSP is defined in Section 133 of the Finance Act 1992 and is the price inclusive of all taxes and duties which a vehicle may reasonably be expected to fetch on a first arm's length sale in the open market in the State by retail. The OMSP of new vehicles in the State is declared to the Revenue Commissioners by a wholesale distributor, while the OMSP of imported second hand vehicles is determined by the Revenue Commissioners based on factors such as age, mileage and vehicle condition.

In order to provide the same tax base for the application of the tax on the registration of vehicles sourced both in the State and abroad, VRT is charged on the OMSP of the vehicle and not on the purchase price of vehicles bought in other jurisdictions. EU Member States are entitled under EU law to charge National taxes provided that such taxes are applied equally to imported and indigenous goods. In this regard, VRT complies with EU law in that the VRT charged on a vehicle imported into the State is equivalent to the amount of residual VRT contained in a similar Irish vehicle that is registered in the State.

In so far as VAT is concerned, Irish VAT law — the Value-Added Tax Act 1972, as amended — must and does comply with the underlying EU VAT law, principally Council Directive 2006/112/EC on the common system of value-added tax.

As regards vehicles brought into the State by private citizens the VAT treatment depends on whether the vehicle is new or used and on whether it is brought in from another EU Member State or a third country. For this purpose, a vehicle is "new" if it is supplied six months or less after its first entry into service or if it has travelled 6,000 kilometres or less. The Deputy may wish to note that a used vehicle brought in to the State by a private citizen from another EU Member State is not subject to VAT.

In the case of new or used motor vehicles imported by private citizens from outside the EU, VAT is charged at the standard rate of 21 per cent and is based on the price of the vehicle, plus the costs of carriage, freight and insurance, and the Customs duties charged. Where a private citizen brings in a new vehicle from another EU Member State, VAT is charged at the standard rate of 21 per cent and the value for calculating the VAT payable is the amount invoiced in the Member State of acquisition (converted to Euro where applicable). Other Member State's VAT shown as being included in such invoiced amounts is not included in the taxable amount for Irish VAT purposes.