Progressive Democrats Response 15/05/02

I refer to your recent email regarding the VAT treatment of charities.

Charities and non-profit groups are exempt under the EU Sixth VAT Directive with which Irish VAT law must comply. This means they do not charge VAT on their services and cannot recover VAT incurred on goods and services that they purchase. Essentially only VAT registered businesses which charge VAT are able to recover VAT. There are no provisions in the EU Directive which would allow for any refund of VAT to exempt bodies.

I would point out, however, that charities already enjoy relief from most taxes. Furthermore, in the Finance Act, 2001, the Minister for Finance, Charlie McCreevy, provided for a new scheme of tax relief for donations to charities. This is a generous scheme which has, I understand, already been of significant benefit to them.

I trust that this explains the position for you.

Yours sincerely

Mary Harney
Tanaiste
Leader of the Progressive Democrats.