Ireland’s plans to introduce a food supplement VAT postponed until November

By Will Chu

- Last updated on GMT

Ireland’s Revenue Commissioners has postponed plans to tax food supplements until 1 November after industry groups and consumers petitioned the government not to approve the planned increase.

The delayed introduction comes after correspondence between the Minister for Finance Paschal Donohoe and Niall Cody, chairman of the Revenue Commissioners, in late February.

Highlighting concerns over the 23% VAT rate planned for 1 March, Donohoe said he appreciated that Revenue must “administer tax legislation without fear or favour, independent of outside influences”.

However, he added that individuals and organisation had approached him to raise concerns about the impact of the plans.

In comments made at a November meeting of the Committee on Finance, Public Expenditure and Reform, Donohoe gave assurances he would address the matter to the tax strategy group during the summer period.

“At the time I stated that “Independent of Revenue’s decisions on interpretation, I will put in place a process that will conclude in the TSG papers to examine some of the policy choices that could be available.”

Public consultation

To ensure this policy review would be effective, Donohoe proposed a period of public consultation, where all parties and colleagues would feedback.

The Minister also agreed to speak to the Minister for Health, to ascertain his views on the use of supplements.

“I am of the view that this approach provides a way of bringing forward the necessary analysis and information to facilitate my consideration of options regarding the legislative provisions concerning the VAT treatment of products in this sector,”​ the letter went on.

“Any consideration by you of how best this process could be supported by the timing, wither immediate or delayed, for the implementation of the new guidance would be much appreciated.”

In response, Cody wrote that a comprehensive review of the legislation and guidance on food supplements had been ordered.

He pointed to the difficulties in distinguishing between food supplement products, which could be zero-rated and those standard rated for VAT treatment.

Added to a likelihood of a “material and growing level of non-compliance in the sector, unfair competition between compliant and non-compliant businesses,”​ a review was recommended.

New December advice

As a result of issues arising from the review, Revenue issued new guidance in December that withdrew the concessionary treatment applied to certain food supplement products.

However, the guidelines did not change the VAT rating of products that did not fall within the concessionary treatment and which were liable for the standard rate.

Products containing folic acid and specific vitamins would continue to be liable at the zero rate.

Cody added the delay to the VAT implementation until the 1 November would “allow time for the enactment of any legislative changes in the context of Budget 2020.”

“The concessionary treatment by Revenue of vitamin, mineral and fish-oil products, and any other similar products that Revenue have specifically ruled as zero-rated, will therefore continue until 1st​ November.”

Amongst those consulted, The Irish Health Trade Association (IHTA) “sincerely welcomed”​ the decision adding “the Minister has made the right call on this urgent issue”.

“We look forward to engaging constructively with him in the months ahead to seek a permanent solution.”

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