EU to soon allow 0% VAT on bicycles, but Irish Government will not take action quickly

— Belgium has already passed legislation to take advantage of VAT rule changes.

Despite the energy crisis caused by the war in Ukraine combined with the need for climate action, the Irish Government is unlikely to act on an imminent EU rule change that allows member states to lower the VAT rate on the sale or repair of bicycles and electric bicycles to 0%.

The issue will be considered as part of the Budget which takes place in October, according to a joint statement from the Department of Transport and Department of Finance. The Government has in recent weeks resisted opposition calls for a “mini-Budget” in advance of the normal October process as a reaction to the energy crisis.

The European Cyclists’ Federation (ECF) said in December that Belgium had already passed legislation to take advantage of the EU-level changes once in place. The change is expected to be finalised at EU-level around April or May.

Holger Haubold, ECF Director of Intellectual Property and Data Collection, said today: “As far as we know, the VAT rates agreement is still supposed to pass as planned. The European Parliament voted on its opinion on March 9, approving the European Council agreement.”

Haubold added: “If anything, the current situation should be even more of a reason for Member States to reduce VAT rates on cycling to make it an even more affordable alternative to individual fuel-driven transport.”

Department of Transport, in December 2021, said that Minister Eamon Ryan would be consulting with Minister For Finance Paschal Donohoe on the rule changes, but no apparent progress has been made since then.

Asked this week by if there has been any progress made on the implementation of the expected VAT rule change, a joint statement from the Department of Transport and Department of Finance issued yesterday said that it is mainly a matter for the Government’s Budget in October.

The joint statement said: “Officials in the Department of Finance will be reviewing all of the options now available to Ireland in setting VAT rates. Future tax changes are generally taken in the context of the Budget. The Department of Finance prepares a series of papers containing tax options for the Tax Strategy Group to be considered in the context of the budgetary process, alongside a wide range of submissions from various stakeholders and lobby groups. The Tax Strategy Group papers will be published in July.”

“The potential to change VAT rate on the repair, rental and supply of bicycles and e-bicycles will form part of the Department of Transport’s Budget Considerations,” the statement said.

As reported yesterday, the Department of Transport also outlined how the Government has no plans to act on International Energy Agency advice to cut oil usage quickly. It outlined already planned measures without referring to quicker action or accrated timelines. The Department mainly mentioned electric motor vehicles and the Five Cities Demand Management Study which it said would be “addressing these challenges in the coming years”.

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