Maureen O'Sullivan (Dublin Central, Independent)
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Question 90: To ask the Minister for Finance if he will include yoga studios as sports and recreational facilities under the currently proposed Finance Bill, in view of the fact that the VAT reduction would have a positive impact on the expansion and growth of these facilities. [17798/11]

Michael Noonan (Limerick City, Fine Gael)
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VAT is charged on the supply of goods and services, and the rate applying is subject to the requirements of EU VAT law with which Irish VAT law must comply. The provision of sporting facilities is among a number of tourist related services being made subject to a new temporary lower reduced VAT rate of 9% from 1 July next. All other goods and services that apply at a reduced rate will continue to be liable at the 13.5% rate.

While the supply of sporting facilities will apply at the new temporary 9% rate, services consisting of the care of the human body supplied in the course of a health studio business or similar business, such as a yoga studio, will remain subject to the 13.5% rate. This arises from the fact that many of goods and services to which Ireland applies a reduced rate of VAT, including yoga classes, have their basis under an EU derogation that provides that as we applied a reduced rate to these items on 1 January 1991, we are entitled to continue applying that reduced rate to those items. However, this continuation of reduced rate application is conditional on the rate being no less than 12%. These are known as 'parked' items, and are provided for under Article 118 of the EU VAT Directive. As yoga studio services are part of these parked items, it is not possible for Ireland to apply the rate of 9% to them.

It is for this reason that the Finance (No. 2) Act 2011 introduced a 9% VAT rate in respect of tourist activities such as restaurant and hotel accommodation services, while other tourist activities such as tour guide services and the short-term hire of cars, boat, caravans and mobile homes remain liable to VAT at the 13.5%. However, it should be noted that in the majority of EU Member States yoga studio services apply at their standard VAT rate of up to 25% in some cases, compared to 13.5% in Ireland.