Written answers

Wednesday, 1 April 2015

Department of Finance

VAT Rate Application

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

47. To ask the Minister for Finance if he will clarify the practice whereby some utilities offer credit or vouchers off a utility bill yet charge value added tax on the full pre-reduction price; if this is an acceptable practice; and if he will make a statement on the matter. [13472/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am advised by the Revenue Commissioners that VAT is a consumption tax, that is, it is a tax that is paid by the final consumer of the good or service.  VAT is an EU-wide tax and Irish VAT law must comply with the EU VAT Directives. Section 37(1) of the VAT Consolidation Act 2010 provides that VAT is chargeable on the full consideration which a taxable person becomes entitled to receive in respect of or in relation to a supply of goods or services "including all taxes, commissions, costs and charges whatsoever" but not including the Value-Added Tax itself.   

It is Revenue's understanding that, in general, utility providers offer discounts in two ways.  The first is a percentage discount, say 5%, on the standard energy unit price.  The discounted price, in this case 95% of the standard energy unit price, is then used to calculate the VAT-inclusive bill amount.  In this way the customer does not pay VAT on the 5% discount.  The second way is by means of a bill credit or cashback.  The bill credit or cashback amount is offset against the VAT-inclusive bill.  Take, for example, a customer whose VAT-inclusive bill is €227 made up of €200 plus €27 VAT.  If this customer receives a bill credit or cashback of €100 then the customer's bill is only €127.  The utility provider accounts for VAT on the VAT-inclusive amount of €127 (VAT-exclusive amount of €112 plus €15 VAT at 13.5% on the €112) being the full consideration which the provider becomes entitled to receive in relation to that supply.  The customer's bill credit or cashback of €100 is essentially a VAT-inclusive discount made up of a VAT-exclusive amount of €88 plus €12 VAT at 13.5% on the €100).  If this is the practice described by the Deputy then it is in line with VAT legislation.

Comments

No comments

Log in or join to post a public comment.