Written answers

Thursday, 24 October 2019

Department of Finance

VAT Rate Application

Photo of Catherine MartinCatherine Martin (Dublin Rathdown, Green Party)
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60. To ask the Minister for Finance his plans to change the VAT rate on food supplements as previously reported; the engagement he has had with business and civil society on such an increase in view of the potentially negative impacts on small businesses, persons with disabilities and other groups; and if he will make a statement on the matter. [43922/19]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is aware, food supplement products are currently subject to VAT at the standard rate of VAT (23%). Shortly after the introduction of VAT, Revenue allowed the zero rate to be applied to certain food supplement products (vitamins, minerals and fish oils). This concessionary approach expanded as the market developed over the years and resulted in the zero rating by Revenue of further similar products, including products other than vitamins, minerals and fish oils.   

Revenue has acknowledged that the scope of its concessionary approach broadened progressively over time to the point that it had become increasingly difficult to maintain an effective distinction between food supplement products that could benefit from the zero rate and those that were standard rated. Revenue acknowledges that this concessionary approach was unsatisfactory and led to diverging and inconsistent practices. There were continuous efforts by elements in the industry to expand its scope to include products that should be standard rated, including products claiming to enhance male fertility, promote hair growth, boost tanning, avoid a hangover and reduce stress.

Following complaints from the Irish Health Trade Association (IHTA), Revenue conducted a comprehensive review of the VAT treatment of food supplement products, including getting an expert report on the definition of food for the purposes of the VAT Consolidation Act. The expert prepared a detailed, scientific report that concluded that food supplement products are not conventional food. Based on the expert report and its own legal analysis, Revenue concluded that the status quo was no longer sustainable. Following the review, Revenue engaged with my Department concerning policy options that might be considered in the context of Finance Bill 2018. The relevant legislation was not changed in Finance Bill 2018 and therefore Revenue issued new guidance in December 2018 which removed the concessionary zero rating of various food supplement products with effect from 1 March 2019. The removal of the concession will only apply on a prospective basis and will not be applied retrospectively by Revenue.

Following representation from Deputies and from the industry, I wrote to Revenue outlining my plans to examine the policy and legislative options for the taxation of food supplement products in the context of Finance Bill 2019. Revenue responded by delaying the withdrawal of its concessionary zero rating of the food supplement products concerned. This allowed time for my Department to carry out a public consultation on the taxation of food supplement products.

The public consultation ran from 18 April to 24 May 2019 and sought input from a wide range of interested parties, including from health and nutrition experts, the Minister for Health and the Health Products Regulatory Authority (‘HPRA’). In total, 121 submissions were received. This included submissions from individuals, businesses, lobby groups and a political party. My officials also met with representatives from industry on several occasions in 2018 and 2019. The results of the public consultation in 2019 were included in the Tax Strategy Group paper on VAT published on my Department's website. The options set out in the TSG paper included maintaining the standard rate of VAT or introducing a reduced rate of VAT.

I have decided to apply the reduced rate of VAT to all food supplement products.  This means that from 1 January 2020, food supplement products which are currently liable at the standard rate of VAT of 23% would become liable to the reduced rate of VAT of 13.5%, while those currently concessionally zero rated will also become liable to the reduced rate rather than the standard rate. 

It is important to clarify that foods for specific groups such as infant follow-on formulae and infant foods, foods for special medical purposes and specially formulated foods (e.g. total diet replacement for weight control) will continue to be zero rated as they are well established and defined categories of food that are essential for vulnerable groups of the population. Fortified foods, such as yoghurts and cereals fortified with vitamins and minerals, will also continue to be zero rated as they are food.

Folic acid, vitamin and mineral human oral products which are licenced or authorised as medicines by the Health Products Regulatory Authority (‘HPRA’) will continue to be zero rated under a different VAT provision for human oral medicines.


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