The Irish Revenue has released guidance regarding the European Court of Justice’s judgment of July 16, 2009, wherein it was ruled that Ireland’s VAT treatment of Government Departments, local authorities and public bodies, infringed the VAT Directive. The Revenue’s guidance gives appropriate information on the judgment's effect on tax law, and Irish taxpayers.
The Revenue’s statement notes:
“On July 16, 2009, the European Court of Justice (ECJ) delivered its judgment in the case taken by the European Commission against Ireland concerning the VAT treatment of Government Departments, local authorities and public bodies. In this case the Commission had challenged our tax treatment of State bodies and non-commercial public bodies as being, in principle, beyond the scope of VAT but with the possibility of being deemed accountable persons by order of the Minister for Finance under section 8(2A) of the VAT Act. The judgment made clear that our legislation does not fully comply with the terms of the VAT Directive1 and needs to be amended.”
“Revenue, in conjunction with the Department of Finance, the Office of the Attorney General and other relevant Departments has begun an analysis of the judgment and the various ways in which our law can be brought into line with the Directive. At this stage, it is anticipated that the appropriate changes will be made by means of the Finance Act 2010.”
“It is expected there will be changes to the mechanism through which the VAT status of an activity or transaction carried on by a public body is determined in law. It is also possible that certain activities or transactions of public bodies, for example, some local authority services that are currently treated as being beyond the scope of VAT, may be found to be liable to VAT. However, at this stage, prior to a change in our law, no changes are to be made by Districts to the tax treatment of any particular body or any specific activities or transactions of public bodies.”
Reactions
“ECJ judgments apply from the date of issue and tax advisors and agents are understood already to be approaching local authorities pointing out what they perceive to be their changed VAT status as a result of this judgment. In at least some cases, in addition to receiving requests for guidance, Districts may receive retrospective claims from State bodies and public bodies, including local authorities, for deductions of input VAT, based on the assumption that they have been making supplies which should have been treated as taxable,” its guidance continues.
Interim Arrangements
“Requests for guidance from, and for registration of, public bodies as a result of this ECJ judgment should be addressed, in the first instance, to the relevant local District. While it is likely that public bodies will already be registered in respect of intra Community Acquisitions or Fourth Schedule Services, applications for new registrations should be held pending the determination of whether it is appropriate to proceed with them. Retrospective registration should be refused.”
“In relation to claims for retrospective deductions of VAT on inputs arising from this judgment, it is Revenue’s view that there is no basis in the Directive for such a deduction even if the non-taxable (and therefore non-deductible) status of an activity is changed by virtue of the application of the ECJ’s judgment. Revenue will strongly contest any claim for retrospective entitlement to input VAT deductibility,” its statement underscored.
“Any requests, applications for registration or claims received from public bodies should be recorded and held in the Districts and acknowledged using the template in the Appendix attached which notes that the implications of the judgment are being reviewed, and that Revenue will revert when the review is complete. A summary record of the correspondence received, noting the name of the public body, the type of query and the activity concerned, should be sent on a monthly basis to VAT Interpretation Branch – Services, Indirect Taxes Division, New Stamping Building, Dublin Castle,” the Revenue’s guidance concluded.
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