The Irish Government recently announced several measures, aimed to support households and businesses, in response to rising energy costs.
While an increase in carbon taxes on home heating is scheduled to come into force from 1 May 2022, amongst the measures introduced to combat increasing energy costs, is the temporary reduction in the VAT rate applicable to gas and electricity bills.
From 1 May 2022 to 31 October 2022, the VAT rate applicable on such supplies will reduce to 9% from 13.5%. Minister for Finance, Paschal Donohoe, stated that the temporary VAT rate reduction “will result in savings of over €50 on an annual gas bill and €70 euro on an annual electricity bill”.
This temporary VAT rate reduction is not extended to home heating oil, which will remain at 13.5%.
Other measures introduced in recent times to combat rising energy costs include the following:
- A €200 rebate on electricity bills
- A reduction of 20c per litre on excise taxes for petrol and a 15c per litre reduction on excise taxes for diesel, a reduction originally due to expire in August 2022 but which has now been extended to Budget Day in October 2022. Within this reduction on excise tax is a further reduction in the excise tax applicable to marked gas oil/green diesel by 2.7c per litre (a total reduction of 4.7c per litre in recent months).
With any change in VAT rates, businesses should be mindful of the impact on their ERP systems.
- Ensure invoices are issued at the correct rate (both sales and purchase invoices).
- Ensure the VAT rate of any impacted supplies will be correctly captured.
- Where credit notes are issued, the VAT rate applicable to the credit note should be the VAT rate applicable at the time the original invoice was raised (e.g. where an invoice is issued in April 2022, VAT at 13.5% should apply to the invoice and also to a subsequent credit note issued in May 2022).
- Where advance payments are made and you operate under the invoice basis of VAT accounting, ensure the VAT rate noted on the invoice is the rate applicable at the earlier of the time the invoice is issued or ought to have been issued.
If you have queries or required assistance, please get in touch with your usual contact at RSM.