Matt Carthy (Cavan-Monaghan, Sinn Fein)
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221. To ask the Minister for Finance the circumstances in which VAT is applied; the rate at which the tax is applied to the labour cost element of an invoice that includes the cost of actual parts, that is, car servicing and other mechanical goods maintenance and upkeep; and if he will make a statement on the matter. [23106/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exempt from VAT. In addition, the Directive allows for historic VAT treatment to be maintained under certain conditions and Ireland, by way of special derogation from the general rule, has retained the application of VAT at the reduced rate, currently 13.5%, to repair or maintenance services relating to movable goods.

However, certain items supplied in the course of any such repair/maintenance service, are specifically excluded from the reduced rate and are therefore liable at the standard rate, currently 23%. These items include accessories, attachments or batteries and tyres, tyre cases, interchangeable tyre treads, inner tubes, and tyre flaps for wheels of all kinds.

The supply of maintenance or repair services of mechanical goods, other than vehicles and agricultural machinery is subject to the two-thirds rule. This rule requires that to benefit from the reduced VAT rate the cost of the materials supplied during the course of the service must not exceed two thirds of the total amount payable for the supply of the service.