Mattie McGrath (Tipperary, Independent)
Link to this: Individually | In context | Oireachtas source

17. To ask the Minister for Finance to make a special short-term provision, to allow grass and silage harvesting activities by farm contractors to be zero rated for a period of two years to allow the sector get the benefit of a 13.5% addition to cashflow on farms, and to support the opportunities that this will provide for reinvestment in additional higher genetic worth dairy and beef animals; and if he will make a statement on the matter. [17491/16]

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

The VAT treatment of goods and services is subject to the requirements of EU VAT law (primarily Council Directive 2006/112/EC) with which Irish VAT law must comply. Article 110 of the EU VAT Directive permits Member States to retain historical zero-rated VAT treatment where a good or service was zero rated on and from 1 January 1991, but no new zero rates can be introduced. As a result, Ireland currently applies the zero rate to a range of goods and services including most foods, children's clothes and shoes, and oral medicines. As agricultural services such as grass and silage harvesting were not charged at the zero rate on 1 January 1991, it is not possible under EU VAT law for Ireland to apply a zero rate to these activities, even on a short-term basis as the Deputy proposes. However, I would point out that the 'combined supply and sowing/planting of seeds/plants etc. for the production of food, including animal feed' is zero-rated for VAT which in turn helps to achieve the aim of higher genetic worth dairy and beef animals as mentioned by the Deputy.

Furthermore, I would point out that farmers who are registered for VAT can recover their VAT costs, including the VAT on services provided by agricultural contractors. Unregistered farmers are compensated by payment of the flat rate addition, currently 5.2%, in addition to the consideration they receive for their supplies of agricultural produce. 

Agricultural contractors are obliged to be VAT-registered if they provide contracting services in excess of €37,500 in a year. VAT-registered traders are obliged to issue VAT invoices in relation to their supplies and to submit VAT returns. Flat-rate farmers are not required to register for VAT unless they are engaged in other activities (e.g. farm contracting services) and the turnover from that other activity exceeds the VAT registration threshold; €37,500 for supply of services and €75,000 for supply of goods.