VAT registration thresholds
The minister announced that the turnover thresholds for supplies of taxable goods and services above which businesses established in Ireland are obliged to register for VAT are to increase from €37,500 to €40,000 for businesses principally engaged in supplies of services and from €75,000 to €80,000 for businesses principally engaged in supplies of goods.
The changes will take effect from 1 January 2024. This represents the first change to the VAT registration thresholds in Ireland since 2008. The change also comes in advance of a package of EU-wide measures aimed at simplifying VAT compliance for small and medium enterprises, which is due to take effect from 1 January 2025 onwards.
It is important to note that there continues to be a “nil” turnover threshold for businesses in receipt of services from abroad on which they are required to operate reverse charge VAT and for non-Irish established traders who make taxable supplies of goods or services on which they are obliged to account for Irish VAT.
VAT rate for gas and electricity
The minister confirmed that the temporary VAT rate of 9% for supplies of gas and electricity will be extended for a further 12 months until 31 October 2024.
This temporary rate came into effect on 1 May 2022 in response to the significant increases in the price of these utilities and has previously been extended on several occasions. The VAT rate for these supplies is now due to revert to 13.5% on 1 November 2024.
VAT rate for eBooks and audio books
The VAT rate applicable to electronic editions of books and audio books will be reduced from 9% to the 0% rate with effect from 1 January 2024. This will bring the VAT rating of e-books and e-audio books in line with that of printed books as well as printed and digital newspapers and news periodicals.
VAT rate for solar panels
The VAT rate applicable to the supply and installation of solar panels in schools will be reduced from 13.5% to the 0% rate with effect from 1 January 2024. This change mirrors the reduction in the VAT rate for the supply and installation of solar panels in private dwellings which took effect from 1 May 2023.
Flat rate addition for farmers
The flat rate addition payable to farmers who are not registered for VAT will decrease from 5% to 4.8% with effect from 1 January 2024. The flat rate addition compensates unregistered farmers for the VAT which they cannot reclaim on their purchases.
Charity VAT compensation scheme
The total annual fund for charities to claim compensation for non-recoverable VAT on their purchases will increase from €5 million to €10 million with effect from 1 January 2024. This scheme aims to reduce the VAT burden on charities and to partially compensate for VAT paid by a charity.
The percentage of VAT incurred which a charity is entitled to reclaim under the scheme is based on the level of its non-public funding and the overall capped amount in the fund is then pro-rated between eligible charities based on their qualifying claims.
Digitisation of VAT
The minister announced that the Revenue will shortly launch a public consultation on the use of digital advances to modernise Ireland’s VAT invoicing and reporting system.
This consultation is expected to seek input from businesses and stakeholders on proposals to make mandatory the issue of electronic invoices to customers and the provision of real-time or close to real-time transmission of transaction data to Revenue.
It is expected that the consultation should align to the EU’s “VAT in the Digital Age” proposals (which remain under discussion in the EU Council) which propose to introduce harmonised e-invoicing and digital reporting obligations for cross-border supplies within the EU in 2028.
These proposals reflect an ambition to tackle tax fraud through the digitisation of VAT regimes and will serve to transform traditional VAT compliance processes. Taxpayers are likely to be required to upgrade their invoicing systems to enable both the receipt and submission of digital e-invoices and, similar to PAYE Modernisation, to provide real-time or close to real-time transactional information to the Revenue.
While Ireland could introduce changes sooner, we would expect it is more likely that any significant changes would take effect in several years’ time, in line with the timeframes set out in the EU’s proposals.
Excise duties and carbon tax
Mineral oils
The minister announced the deferral of the excise duty increases of 8 cent (VAT inclusive) per litre for petrol, 6 cent (VAT inclusive) on diesel and 3.4 cent (VAT inclusive) for Marked Gas Oil (MGO) which had been due to come into effect from 1 November 2023.
Rather, the existing temporary excise duty rate reductions on such fuels will be extended until 31 March 2023 and the excise increases will be introduced in two equal instalments on 1 April 2024 and 1 August 2024.
However, the carbon tax rate for petrol and diesel per tonne of carbon dioxide emitted will increase from €48.50 to €56 from midnight on 10 October 2023 based on the trajectory for annual increases set out in Finance Act 2020.
This increase will apply to auto petrol and diesel with effect from 11 October 2023 and to all other fuels with effect from 1 May 2024.
Tobacco products
The excise duty on a packet of 20 cigarettes in the most popular price category will increase by 75 cent (VAT inclusive), with a pro-rata increase on other tobacco products. This measure will take effect from midnight on 10 October 2023 and will bring the price of a pack of 20 cigarettes in the most popular price category to €16.75.
The minister also indicated the Government’s intention to introduce a domestic tax on e-cigarettes and vaping products in Budget 2025. Further work would be required to draft this legislation.
Vehicle registration tax
The minister confirmed that the Vehicle Registration Tax (VRT) relief in respect of the registration of battery powered electric vehicles with a value of up to €50,000, will be extended for a further two years to 31 December 2025.
Customs duty
There were no changes in respect of customs duty announced in the Budget.
Queries? Get in touch
The measures announced in Budget 2024 will affect businesses and individuals across Ireland. If you have any queries on the impact of these changes for your business, please contact Glenn Reynolds or David Duffy of our tax team.
We'd be delighted to hear from you.
Glenn Reynolds
Partner, Head of Indirect Tax - VAT & Customs
KPMG in Ireland
David Duffy
Partner, Indirect Tax - VAT & Customs
KPMG in Ireland
