EU Rate Limits

EU law sets the parameters within which states may charge VAT.  The lowest standard rate permissible is 15%.  The Republic of Ireland rate is at the higher end,  at 23%.,  The standard UK rate was 17.5% for a number of years. It was increased to 20%.

The standard rate in Ireland is 23%.  It had been 21% for many years and was lowered to this rate temporarily during the Pandemic.  There is a lower rate of 13.5% applicable to a range of activities, in particular in the construction sector. A special 9% rate was introduced for certain sectors during the economic crisis.

The lower rate of 4.8% applies in respect of various cultural and livestock supplies.  There is a special flat rate addition of 5.2 percent available to farmers.

Main Rates

Most goods and services are subject to VAT at 23% of the sales price. Some goods and services are subject to the lower 13.5%, 5% and zero rate. Other goods and services are exempt from VAT for social and policy reasons. The goods and services subject ot the lower rates are listed in the VAT legislation.

The standard rate of value added tax is 23%. There are lower rates of 13/2% 9% 4.8% and 0%. The flat rate compensation for farmers is 5.6% The rates are constrained by EU directive which sets upper and lower limits and defines categories of supply which may be zero rated or exempted.

The schedules to the Value Added Tax Act list goods and services subject to lower rates or are exempt. In some cases questions of interpretation may arise as to how they apply to a particular category of goods or services. Revenue has published guidance by way of an index of numerous goods and services.

There is provision for application to Revenue for a decision as to the correct rate applicable to any particular category of goods or services. There is a similar provision for determination of whether a particular supply of goods or services is exempt from VAT. An appeal may be made to the Appeal Commissioners from the decision.

Lower Rates Specified

The VAT legislation specifies activities in its Schedules with reference to the zero and other favourable rates.  The scope of these exemptions may be the subject of interpretation from time to time.

Exempt activities are set out in Schedule 1 to the VAT Act.  See the separate chapter on the  categories of exempt activities.

Schedule 2 sets out the goods and services charged at 0 percent rate.  Schedule 3 sets out the goods and services charged at 13.5 percent rate.

The standard  (23%r) rate  applies to all other goods and services. Where goods and services are excluded from a particular paragraph, they are presumed to be  excluded from other paragraphs, unless as a contrary intention applies,


Suppliers of VAT exempt goods cannot register for VAT and have minimal obligations in relation to records. Critically, they cannot recover VAT on their purchases. The following are some of the more commonly encountered VAT exempt supplies,

  • financial services, insurance services;
  • educational services;
  • profession medical services, dental services;
  •  hospital services,  nursing home care services;
  • passenger transport;
  • travel agents;
  • betting
  • funerals and
  • certain supply of new immovable goods.

Finance Act 2017 amends the provisions in relation to exempted education activity. It enables the making of regulations relating to educational services. The amendments clarify the application of the exemption to vocational training and to educational services.


Certain goods and services are exempt from VAT. Where a supply of goods of services is exempt. This has the consequence that is not possible for the supplier of the service to reclaim VAT on his purchases and business costs, that bear VAT .

Zero rating is beneficial in that the input tax is recovered but VAT is not chargeable. The following are some of the important zero rated. Supplies;

  • Exports outside the EU;
  • Goods supplied to VAT registered customers in the EU;
  • supply of services to business customers in the EU;
  • sale and  hiring of  aircraft and  ships
  • certain  animal feeds, fertilisers
  • most food & drink, but not alcohol.

The 4.8% rate applies, in the certain agricultural activities such as the sale of cattle, horses, sheep and pigs.

Reduced Rates

The reduced rate of 13.5% applies to listed activities including the following;

  • electricity and gas;
  • food and drink in a restaurant or hotel;
  • cinemas, fairgrounds, golf clubs,
  • agricultural services,
  • newspapers and magazines
  • hotel or guesthouse lettings short-term
  • car hire
  • antiques repair of goods
  • live poultry, property building waste disposal

The full list appears in the VAT legislation.

Variations in Rates

Rates change within certain EU derived constraints. For example, during the financial crisis certain tourist and other activities were granted a favourable 9% rate. Finance Act 2018 provides that those goods and services which were previously subject to Value-Added Tax at 9 Per cent will be subject to Value-Added Tax at 13.5 Per cent.

This does not apply to the  provision of sporting facilities and the supply of newspapers and other periodicals. It also provides for the 9 Per cent rate to apply to the supply of electronicpublications.

FA 2012  reduced the rate of VAT applicable to the supply of district heating units.

Finance Act 2014 makes a number of amendments to the Schedule to the VAT legislation in relation to the rates of VAT chargeable.

Finance Act 2017 provides that the standard rate of tax applies sunbed VAT services as in from 1st January 2018.

Mixed Supplies

Where there is a mixed supply of goods and services, questions may arise as to the appropriate rate of VAT. This may happen where goods are installed or fixed in a building. A 23% rate is likely to apply to the gods but a 13.5% rate would apply to the service.

The rate applicable to the goods applies, if the cost of goods exceed two thirds of the contract price. The rule only applies where contracts for the provision of services . It does not apply to contracts for the sale of goods with an incidental supply of services.

Where the contract work is supply of service consisting of work on movable goods, which are  imported for the purpose of  such work and dispatched out of the EU, a zero rate applies.

Where goods are made up from parts and materials supplied by the consumer, the supplier must account for VAT on the full value of goods supplied.

Types of Supplies

There may be are multiple, composite, ancillary, individual or principal supplies.

An individual supply is a supply of goods or services which is a constituent part of a multiple supply is physically and economically dissociable from the other goods or services forming part of that multiple supply and is capable of being supplied as a good or service in its own right.

In the case of multiple supplies of two or more items together, a total price covers all supplies. Supplies are made in conjunction with each other for a total price covering all the individual supplies. There is no element of composite supply.

In the case of a composite supply one is the principal  supply and the other is ancillary. The principal supply is that which predominates. There may be individual supplies where the goods or services are supplied but they are capable of being distinguished.

An ancillary supply is a supplyf orming part of a composite supply which is not physically or economically dissociable the from a principal supply and is capable of being supplied only in the context of the better enjoyment of that principal supply. A principal supply is the supply of goods or services which constitutes the predominant element of the composite supply and to which any other supply forming part of that composite supply is ancillary

Mixed Supplies

Each supply is considered separately.  The VAT applicable to each supply is determined at the appropriate rate.

In the case of multiple supplies, each element is an individual supply and is rated accordingly for VAT.  The consideration must be apportioned. The apportionment must reflect the proportion of the relevant values. There are no prescribed methods of apportionment, but they must be reasonable and acceptable to Revenue.  Apportionment based on costs may often be appropriate, but it must be shown to be reasonable.

Where there are composite supplies, the principal supply determines the rate.  Other supplies must be ancillary.

Where the supply involves the delivery by the contractor of movable goods or goods which are assembled by the contractor from goods entrusted to it by another, whether or not the contractor has provided any part of the goods, the  appropriate rate is that applicable to the goods delivered.  This is so,  notwithstanding that the contract work is in the nature of a service.

Applying the Rate

In the case of a multiple supplies, the consideration or price is apportioned between the various elements at the relevant rates that apply to each element. It implies that there is no principal and ancillary supply. Where there is a single consideration or price covering the individual elements,  it is apportioned.

Where the cost of supply of individual supplies in a multiple supply is less than 50% of the  total consideration or one Euro whichever is less, the  supplier may disregard that individual supply forthe purpose of applying the appropriate rate. Where this applies to  more than one element the maximum of all supplies which can be disregarded is €1.

In the case of a composite supply, the VAT rate applicable to the principal supply  applies. That supply also determines the place of supply and the time of supplies. The entire supply is treated as if it were supply of the principal element of the supply.

Two-Thirds Rule for Goods

 Where in the case of a supply of services the element attributable to the supply of goods exceeds two thirds the rate on the supply of goods is applied to the whole. This is relevant in construction where the rate of VAT is 13.5% on  building construction services while it is 23% for goods


Where services are supplied which involves processing goods so that they change category the rate of VAT is determined by reference to the goods in their initial state. Where services are undertaken on goods which are immediately exported out of the European Union is zero rate applies. This equates the rate applicable to the service to the rate applicable to exports.

Where goods are produced from materials provided by the customer and the rate of VAT is higher on the processed goods than the materials,then the supplier must also account for the additional VAT on on the value of the materials at the higher rate of the finished goods relative to the lower rate of the input material.

Where a catering service is provided with food, the caterer must also charge VAT on the value of the food (which would otherwise be zero.


The Finance Number 2 Act 2013 increases the flat rate addition from 4.8% to 5%.

Supplies of horses not intended for use for food or agricultural production, and the supply of Greyhounds was subject to the 9% reduced rate. 13.5% reduced rate applies to insemination services supplies for horses and greyhounds.



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Draft Articles; The articles on this website are in draft form and are subject to further review for typographical errors and, in some cases, updating and correction. It is intended to include references to the sources of materials and acknowledgements in the final version. The content of articles with [EU] in the title and some of the articles in the section on Agriculture are a reproduction of or are based on European or Irish public sector information.

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