I propose to take Questions Nos. 143 and 144 together.
The VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law is obliged to comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate, subject to strict rules including limits on the numbers of categories to which lower rates may be applied.
The Directive also requires that goods imported into a Member State from outside the EU are subject to VAT at the point of importation, and imported goods are liable to VAT as would apply if the goods were sold within the State.
Buses are not included in the categories of goods and services on which the EU VAT Directive allows a lower rate of VAT to be applied, and so they are liable to VAT at the standard rate – which in Ireland is currently 23% – when they are supplied in the State or when they are imported into the State from Great Britain or another third country. If buses are purchased by a business in the State from a business in another EU country or in Northern Ireland, then the Irish business must self-account for the VAT at the standard rate to Revenue.
The rate of VAT applying to buses in Ireland could only change if the standard rate of VAT were changed, however, all goods and services currently taxed at the standard rate would also be subject to such a change.
The EU VAT Directive allows for historic VAT treatment to be maintained by a Member State under certain conditions and, on this basis, Ireland has retained its application of VAT exemption to the transport of passengers and their accompanying baggage. This means that, under Ireland’s VAT rules, suppliers of passenger transport services, including school transport, do not register for VAT, do not charge VAT on the supply of their services and, consequently, have no VAT recovery entitlement on their input costs.
In accordance with the EU rules, Ireland may continue to apply this historic VAT exemption on the supply of domestic passenger transport but, for as long as the exemption remains, the conditions under which the exemption was granted cannot be changed. The introduction of a new entitlement to VAT recovery for the passenger transport sector could only be done if Ireland were to decide to end its historic exemption for the sector and bring passenger transport services into the VAT net; this would then require suppliers to register for VAT and require them to charge VAT on their passenger fares, including school transport. While the EU Directive permits a Member State to apply a zero rate of VAT to passenger transport services thereby enabling deductibility, this option is not currently open to Ireland because we already apply the Directive’s zero-rating to the maximum number of categories that is permitted.
Ireland has also maintained a relieving provision, the Value Added Tax (Refund of Tax) (Touring Coaches) Order of 2012, which provides for a refund of VAT on the cost of acquiring certain tour coaches by qualifying businesses. One of the key conditions of the Order, is that qualifying business is engaged in the business of carriage for reward of tourists by road under contract for group transport and that the vehicle is in that business. The Order does not extend to school transport.
The Deputy is asking about the possibility of extending the scope of the Order to all licensed bus operators, thereby allowing them to reclaim VAT on the purchase of new buses. Such a measure would not be compatible with the EU VAT Directive, particularly having regard to the conditions under which Ireland is permitted to maintain its historic VAT exemption for passenger transport.
Customs duty needs to be considered in relation to goods brought into State from outside the EU but not for the movement of goods within the EU. Customs duty rates are determined by the EU and as Customs is an EU competence, it is not possible for Ireland to apply a different rate as Customs duty rates are common across all Member States.
Buses imported into the State are generally subject to a customs duty of around 10% or 16% depending on the type of engine. However, imports of new and second-hand buses from the Great Britain (GB) into Ireland can claim a preferential tariff rate of 0% under the EU-UK Trade and Cooperation Agreement (TCA) where they can provide documentary proof that the bus is of UK origin. The documentation proving UK origin should be included with the Customs import declaration to allow the bus to be released to their owners in a timely manner. The proofs required to claim preferential origin are detailed in the TCA and are the same as the proofs required in other trade agreements that the EU has entered into, and generally come from the exporter, via the bus supplier or manufacturer.
There is also a Returned Goods Relief which may be available if the bus was originally exported from the EU to the UK, has not been altered and is being re-imported into the EU within three years of export. In accordance with the EU Customs Code, there are specific proofs required to qualify for the relief from Customs Duty and import VAT. In such circumstances, guidelines to the trade are updated regularly on the Revenue website and through Revenue’s direct communication to the trade via eCustoms Notifications.
Goods re-imported into the European Union guidelines: www.revenue.ie/en/customs/businesses/relief-duty-vat/reimported-into-eu/index.aspx.
eCustoms notifications: www.revenue.ie/en/customs/businesses/electronic-systems/ais/ecustoms-notifications/index.aspx.
