PAC32-R-2614(ii) B Meeting 12/12/2019

Note for the Public Accounts Committee on Food Supplements

Irish VAT legislation does not provide a zero rate for food supplement products; instead there
is a legislative provision for zero rating food. Food supplement products are subject to the
standard rate of VAT (23%). Shortly after the introduction of VAT, Revenue allowed the
zero rate to be applied to certain food supplement products (vitamins, minerals and fish oils).
This concessionary approach expanded as the market developed over the years and resulted
in the zero rating by Revenue of further similar products, including products other than
vitamins, minerals and fish oils.

Following complaints from the Irish Health Trade Association (IHTA), Revenue conducted a
comprehensive review of the VAT treatment of food supplement products. Based on an
expert report and its own legal analysis, Revenue concluded that the status quo was no longer
sustainable and issued new guidance in December 2018 which removed the concessionary
zero rating of various food supplement products with effect from 1 March 2019.

Following representation from Deputies and from the industry, the Minister for Finance
wrote to Revenue outlining his plans to examine the policy and legislative options for the
taxation of food supplement products in the context of Finance Bill 2019. Revenue responded
by delaying the withdrawal of its concessionary zero rating of the food supplement products
concerned. This allowed time for the Department of Finance to carry out a public
consultation on the taxation of food supplement products.

Based on this consultation, the Minister for Finance introduced a provision in this year’s
Finance Bill applying the reduced rate of VAT (13.5%) to food supplements from 1 January
2020. In the absence of this provision the standard VAT rate of 23% would apply to food
supplements, including those that had been concessionally zero rated previously.

It is important to clarify that certain products will not be impacted by the legislative
change. Foods for specific groups such as infant and follow-on formulae and infant foods,
foods for special medical purposes and specially formulated foods will continue to be zero
rated as they are well established and defined categories of food. Fortified foods, such as
yoghurts and cereals fortified with vitamins and minerals, will also continue to be zero rated
as they are food.

Folic acid, vitamin and mineral products which are licenced or authorised as medicines by the
Health Products Regulatory Authority will continue to be zero rated under a different VAT
provision for human oral medicines. Any food supplement product that the HPRA licenses or
authorises with regard to being an oral medicine will be zero rated as a matter of course.