Emer Currie (Dublin West, Fine Gael)
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101. To ask the Minister for Finance the rules which apply to the setting of reduced VAT rates for categories of goods and services subject to a historic VAT derogation. [55583/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The setting of VAT rates is subject to the EU VAT Directive, with which Irish VAT law must comply. The Directive generally holds that all goods and services are subject to VAT at the standard rate which must be set at a minimum of 15%. The exception to this is whether a good or service is listed under Annex III of the Directive where either a reduced rate or a VAT exemption may be applied.

Under Article 105a of the Directive, Member States who were applying rates lower than the minimum to goods and services not laid out under Annex III on 1 January 2021 may still apply those rates without prejudice. This is the current basis for maintaining a reduced rate of VAT via a historical derogation.

In availing of this derogation, a VAT rate must not be set below 12%. Ireland currently has two reduced VAT rates: 13.5% and 9%. As a result of this, the 13.5% rate applies to several categories of goods and services that are deemed to be "parked" and cannot be lowered below 12%.