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| Ireland Amends VAT Law On Public Bodies |
by Jason Gorringe, Tax-News.com, London
Tuesday, July 06, 2010
The Irish Minister for Finance, Brian Lenihan has announced that
he intends to bring forward legislative changes in the Finance Bill 2011 to
deal with the value-added tax (VAT) treatment of some properties to be sold by public bodies after July 1, following a European Commission ruling that outlawed the sale of public
property free from the tax.
The measures will apply in particular to housing supplied by public bodies,
including local authorities, after July 1, 2010, which was acquired or developed
by them before that date, and where there was no entitlement to deductibility
on VAT inputs. Currently such properties will become subject to VAT on July 1
but where the property was acquired or developed before public bodies became
subject to VAT, there would be no entitlement to deduct input VAT in respect
of the purchase or development of the property. To overcome the resulting difficulty,
a transitional VAT deductibility adjustment measure is being introduced, Lenihan
said.
Announcing the government’s decision on the matter, Lenihan stated:
“The supply of local authority housing will become subject to VAT from
July 1, 2010, as a consequence of the judgement in the European Court of Justice
Case 554/07. However, a transitional difficulty arises where property is liable
to VAT in full from July 1, 2010, without having entitlement to deduct VAT at
the input stage where the property was acquired or developed by the public body,
including a local authority, before the introduction of VAT.”
Lenihan disclosed that concerns had been raised on this issue in recent months and he had therefore decided to introduce a transitional
measure to adjust VAT on the point of sale of such properties. In this regard,
Lenihan said he had proposed that Section 4C of the VAT Act 1972, which provides
an adjustment for a similar type transitional difficulty which arose in 2008
when the new rules for VAT on property were introduced, should be extended so
as to provide a deductibility adjustment no greater than the value of the VAT
due on the sale, for housing sold by public bodies after July 1, 2010, which
were acquired or developed by them before that date, and where there is otherwise
no entitlement to claim VAT input credit.
“Introducing such a VAT adjustment measure will greatly assist local
authorities who otherwise would have been disadvantaged. In addition, as the
VAT adjustment will arise at the time the VAT liability is due it will avoid
the need to increase the sale price to the customer,” Lenihan explained.
This measure will be enacted in Finance Bill 2011 but will
take effect from July 1, 2010.
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