Background
Charities are generally exempt from VAT under Irish and EU VAT
law. This means that they do not charge VAT on the services they
provide and cannot recover VAT incurred on goods and services that
they purchase. Only VAT registered charities which charge VAT are
able to recover VAT, with the exception of exported goods and
donations of certain medical research equipment. This places a
signification VAT cost burden on charities and as a result, this
announcement from the Minister is a breakthrough for charities and
the sector who have been campaigning for it for decades.
A working group was formed in 2015 to examine proposals to
reduce the VAT burden on charities and on the basis of these
deliberations, the Minister for Finance announced a VAT
Compensation Refund Scheme (the "Scheme") as part of
Budget 2018 to compensate charities for the VAT they occur on their
inputs, in recognition of the work undertaken by the charities
sector.
