VAT and other indirect taxes | KPMG | IE
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VAT and other indirect taxes

VAT and other indirect taxes

VAT and other indirect taxes

Increase in VAT rate for tourism and hospitality sectors

As speculated in media reports in recent days, the minister confirmed that the VAT rate applicable to services in the tourism and hospitality sectors will increase from 9% to 13.5% with effect from 1 January 2019.

The 9% VAT rate will, however, continue to apply to sales of printed newspapers and the provision of sporting facilities. The minister also announced that the 9% rate will be extended to e-books and digitally supplied newspapers with effect from 1 January 2019 (these items are currently subject to VAT at 23%).

The 9% VAT rate was originally introduced as a stimulus measure in July 2011 as part of a Government jobs initiative for the tourism and hospitality sectors. A Department of Finance study into the measure, released in July 2018, concluded that the benefits of the 9% rate for the tourism and hospitality sectors no longer outweighed the cost of VAT receipts foregone.

Consequently, from 1 January 2019, the 13.5% VAT rate will apply to restaurant and catering services, hotel and similar accommodation, and admissions to cinemas, museums and other attractions. The changes will also impact on certain other supplies including supplies of live horses (other than for food or agricultural production) as well as hairdressing. Suppliers of these goods and services will need to consider the impact of the higher VAT rate on their pricing, and will need to update their systems and procedures to apply the correct VAT rate from 1 January 2019 onwards. In addition, as the VAT charged on hotels, restaurants and other entertainment is generally not deductible, business purchasers of these services will also suffer an increased cost.

 The reduction in the VAT rate from 23% to 9% for e-books and digitally supplied newspapers follows agreement reached in the EU Council earlier this month to allow reduced rates of VAT to apply to digital publications. Prior to this, EU VAT rules required all EU Member States, including Ireland, to apply the standard rate of VAT (currently 23%).

There were no other changes to VAT rates or to the flat-rate credit for unregistered farmers.

Excise Duty

The excise duty on a packet of 20 cigarettes will increase by 50 cents (including VAT) with a pro-rata increase on other tobacco products, and an increase in the minimum excise duty on all tobacco products. The above measures will take effect from midnight on 9 October 2018. There are no increases in excise on alcohol, diesel or petrol, and motor tax rates also remain unchanged.

Betting Duty

The minister announced an increase in the rate of betting duty from 1% to 2% for bets placed by customers in the State. In addition, betting duty levied on commission earned by betting intermediaries and exchanges will increase from 15% to 25%.Both measures are to take effect from 1 January 2019.

Vehicle Registration Tax

While there was no increase in the excise rate on diesel, the minister announced the introduction of a 1% Vehicle Registration Tax (VRT) surcharge on diesel engine passenger vehicles registered in the State from 1 January 2019.

The VRT reliefs available for the purchase of conventional hybrid electric vehicles and plug-in hybrid electric vehicles are being extended to 31 December 2019. The relief for hybrid vehicles had been due to expire at the end of 2018. Reliefs in place for electric (non-hybrid) vehicles are scheduled to continue until the end of 2021. The reliefs are up to a maximum of €5,000 for electric vehicles with lower amounts for hybrid vehicles.

Carbon Tax

There was no increase in the rate of Carbon Tax in the Budget. There had been speculation that the minister would raise carbon tax following the announcement during last year’s Budget that a review of carbon tax would be undertaken. While there was no increase, the minister announced his intention to set out a long-term trajectory for carbon tax increases out to 2030.