Minister Donohoe announces commencement of VAT Compensation Scheme for Charities
€5m available in 2019 to finance payments under the scheme
Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Friday) announced the making of the Value-Added Tax (Refund of Tax) (Charities Compensation Scheme) Order 2018, which was signed into law on 18 December 2018.
This Order gives effect to the Budget 2018 announcement of a VAT Compensation Scheme for Charities, which will allow charities to reclaim a proportion of their VAT costs based on the level of non-public funding they receive.
A capped fund of €5 million will be available in 2019, to finance payments under the scheme in respect of claims of VAT paid in 2018.
The terms of the VAT Compensation Scheme as outlined in last year’s Budget are contained in the VAT Refund Order. These include:
- Charities must be registered with the Charities Regulator, have tax clearance, and be in possession of up to date audited accounts;
- A claim must be based on the level of privately-sourced income raised by a charity, so that where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% from privately sourced income, they can claim 70% of the VAT they paid during the year;
- Where the total amount of claims in a year exceeds the capped amount, charities will be paid on a pro rata basis, i.e. where the total value of claims is double the capped pool amount, each charity will receive 50% of their claim.
Minister Donohoe said: ‘The VAT Refund Order is the product of significant engagement between officials of my Department and the Revenue Commissioners and the charities sector and I want to thank the sector for its positive contribution to this process’.
The facility to make claims under the scheme will be available on Revenue’s Online Service from January 2019. Guidance on the scheme for charities is available on the Revenue Commissioner’s website at www.revenue.ie.