Irish Government continues to defer question of 0% tax on bicycles to Budget in October

Despite the on-going energy crisis, the Government is continuing to defer the question of if and when it might reduce the VAT on bicycles and servicing to the Budget in October.

As reported by this website previously, an EU rule change allowing Governments to reduce the VAT rate to 0% is expected to take place shortly. Lower rates of VAT will be able to be applied to goods and services such as the sale or repair of bicycles and electric bicycles.

It was known last year that Belgium already passed legislation to take advantage of the EU rule change once finalised at EU-level — progress on this was reportedly made in early March and the change is expected to be finalised this month or soon afterwards.

Once the rule change is finalised, the VAT rate for bicycles could be reduced to zero, if Government choices to set it at that level.

In a written parliamentary question, Cork East TD, Pat Buckley (Sinn Fein), asked the “Minister for Finance if his Department will consider lowering the VAT rate to 0% on the sale and repair of bicycles and electric bicycles; if his Department will follow the lead of Belgium which has already passed legislation to take advantage of European rule changes; and if he will make a statement on the matter.”

Minister for Finance and Dublin Central TD, Paschal Donohoe (Fine Gael), said: “I understand that the proposal for reform of VAT rates is currently being finalised, this process involves, inter alia, ensuring consistent translations of the text in every working language of the European Union. Once finalised, I expect the proposal will be published in the Official Journal of the European Union in the coming weeks.”

“Officials in my Department are currently reviewing the options now available to Ireland in setting VAT rates. This will include consideration of the new options available to Member States when setting VAT rates as well as the new limitations introduced on how reduced rates may be applied,” he sadi.

Minister Donohoe added: “Decisions about tax changes are generally taken in the context of the Budget and, as part of our normal annual Budget preparations, various options for tax policy changes will be considered by the Tax Strategy Group prior to Budget 2023. The papers presented to the Tax Strategy Group, including a paper on VAT, are published in advance of the Budget.”

In March, Holger Haubold, European Cyclists’ Federation (ECF) Director of Intellectual Property and Data Collection, told “As far as we know, the VAT rates agreement is still supposed to pass as planned… 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.”

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