Irish Revenue Facing Potential VAT Refund Bill Of EUR200 Million

by Jason Gorringe, Tax-News.com, London

19 September 2005

The Irish Independent has reported that Ireland's employers may soon be entitled to a tax rebate totalling up to EUR200 million, with the Revenue Commissioners thought likely to back down in a long-running row over value added tax payments on subsidised canteens.

According to sources familiar with the situation, the Revenue is now prepared to accept the position that many companies are overpaying VAT on employee canteens, despite earlier denying that a ruling by the European Court of Justice in a similar case against the Swedish government does not apply to Ireland.

At issue is whether VAT is due on the reduced cost of meals in subsidised staff canteens, or whether the tax is payable on the full cost of supplying the food. The Swedish government's position in the case against a hotel group was that VAT was payable on the full cost of the food, a position shared by several other member states, including Ireland. However, the ECJ decided that there is no legislation telling companies to pay VAT on anything other than the price paid in the staff canteens.

A spokesperson for the Revenue revealed that a review of the issue was at an advanced stage, but would not be drawn on what the outcome of the review will be.

Estimates vary as to the total tax refund bill the Revenue will have to pay to those companies which have been overpaying VAT, but several claims have already been submitted to the tax office and tax consultants are putting the final figure at anything between EUR50 million and EUR200 million.

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