Irish VAT refund for charities – guidance published

The Irish Government has confirmed that there will be a new tax relief scheme made available to charities who want to apply for exemptions. While the fund, which is capped at €5 million a year, is modest it sets an important precedent by recognising the obstacles that VAT presents to charities. Further detail will follow. CTG has worked closely with Charities Institute Ireland through the ECCVAT network and shared information about how targeted VAT refund schemes have been secured in the UK.

*UPDATE* A new Tax and Duty Manual (TDM) VAT Compensation Scheme Guidelines has been created and provides an overview of the scheme, including issues such as eligibility criteria, eligible tax and the application process.

Responding to a question from Fianna Fáil’s finance spokesperson Michael McGrath, the Minister for Finance Paschal Donohoe said:

I am advised that the Revenue Commissioners have developed systems to enable charities submit claims and to support processing and payment of claims. The facility to make claims under the scheme will be available on ROS from January 2019. In addition, there has been extensive consultation with Charities Institute Ireland concerning the details of the scheme and the administrative arrangements that will apply, and guidance will be published by Revenue after the Order is signed.

The scheme will take effect from 1 January 2018 but will be paid one year in arrears, so that in 2019, charities will be able to submit claims in respect of the VAT costs incurred in the calendar year 2018. A capped fund of €5 million will be available in 2019 to finance payments under the scheme. Claims can be submitted annually by charities who are registered with Revenue, hold a charitable tax exemption under Section 207 of the Taxes Consolidation Act 1997 and are registered with the Charities Regulatory Authority (CRA). Additionally, they must hold a Tax Clearance Certificate and be in possession of a set of audited accounts for a financial year which ends no earlier than in the calendar year to which the claim relates.

Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive. For example, where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% from privately sourced income, they can claim 70% of their VAT input costs for the year. Where the total amount of claims in a year exceeds the capped amount, charities will be paid on a pro rata basis, i.e. where the total value of claims is double the capped pool amount, each charity will receive 50% of their claim.