On 10 October, the Department of Finance released the first draft of Finance Bill 2024. This Bill sets out the proposed legislative changes required in order to implement the Budget Day announcements of 1 October. In addition to what was announced in the Budget, the Bill also proposes to introduce a number of new measures. Please see an overview below of the key VAT changes.
Key VAT Changes
VAT Registration Thresholds
As announced in the Budget, the Bill formally confirms the increase in the VAT registration thresholds from €40,000 for services and €80,000 for goods to €42,500 for services and €85,000 for goods with effect from 1 January 2025.
VAT Rate Changes
The Bill formally legislates for the VAT rate changes announced in the Budget including:
The temporary 9% VAT rate for the supply of electricity and gas has been extended for an additional six months, until 30 April 2025.
The VAT rate on the supply and installation of low emissions Heat Pumps will reduce from 23% to 9% with effect from 1 January 2025 to incentivise homeowners to install such heat pumps.
Flat-Rate Addition
As outlined in the Budget, the Bill confirms that with effect from 1 January 2025, the flat-rate addition for farmers will increase from 4.8% to 5.1%. The Flat Rate Addition compensates farmers who are not VAT registered for VAT incurred on their purchases.
Management of EU Alternative Investment Funds
The Bill amends VAT legislation to confirm that the VAT exemption for the management of EU Alternative Investment Funds (“AIFs”) can apply to all EU AIFs including where the AIF manager is authorised by, or registered with, the competent authority of an EU Member State including Ireland. The change will in practice most likely impact the management of 1907 Limited Partnerships where they qualify as an AIF and which are managed by an Irish AIFM as well as potentially impacting the VAT recovery position of Irish AIFMs who provide management services to (non-Irish) EU AIFs.
Liquidators and Receivers
The Bill clarifies that the above-mentioned parties (and only such parties) can recover the VAT it directly incurs through the VAT registration established as a result of and under such a Power exercisable by them.
Payment Service Providers
The bill introduces a number of separate fixed penalties of €4,000 per instant where a Payment Service Provider does not comply with its obligations under the Payment Services Directive as outlined in Part 9A of the VATCA 2010.
VAT Rate Clarification
The bill clarifies that the standard rate of VAT (currently 23%) applies to juice extracted, or drinkable products derived, from fruit, vegetables, plants, grains, seeds or pulses.
Covid-19: Special Warehousing and Interest Provisions
The Bill confirms that certain interest provisions will apply to Covid-19 warehoused VAT debts where such a VAT registered person does not comply with its repayment agreement with Revenue re same or comply with its normal VAT obligations.
Legislative Updates to the VAT Act
The Bill provides for some other minor clarifications and updates to the VAT Act including the deletion of certain legislative references which it feels are no longer used or necessary.
Additional information
For more specific changes included in the Finance Bill 2024, read the following expert insights: