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Cabinet agrees amendment to Brexit Bill 2020 to deal with VAT Retail Export Scheme to support retailers - Donohoe

Cabinet yesterday (Tuesday) agreed to a Committee Stage Amendment to the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2020 to deal with the VAT Retail Export Scheme.

Under existing rules, when the UK becomes a third country, visitors from there will be able to avail of the VAT Retail Export Scheme, which enables travellers that are resident outside the EU to benefit from VAT relief on goods that are purchased in the EU and subsequently exported when the traveller leaves.

The UK’s status as a ‘third country’ will render UK residents as eligible for VAT refunds on purchases of qualifying goods under the scheme, post Brexit, unless Ireland implements some legislative changes.

However, a concern exists that, considering Ireland’s proximity to the UK and the resultant volume of traffic, there could be significant scope for abuse of the scheme, with consequential knock-on effects for retailers who are engaged with the scheme.

The Bill, as published, provided that the value of a supply of qualifying goods must exceed €175 (inclusive of VAT) in order to qualify for a refund under the Scheme.  This applies to all third country travellers who are seeking a refund. 

The amendment seeks reduce the minimum purchase threshold of the VAT Retail Export Scheme from €175 to €75, to ensure that Irish retailers are supported in this extraordinary time.

Minister Donohoe said: ‘By excluding goods below a certain value threshold from the Scheme and requiring proof of declaration of importation into the UK for any goods for which a refund is claimed by a UK based traveller, it is my intention to ensure that double non-taxation and scope for abuse of the scheme are minimised. This amendment is important for retailers, especially those whose businesses are engaged with the tourism sector. The reduction from €175 to €75 retains protections for the Exchequer while also acknowledging the potential impact that not making this change would have on retailers across the island. Cabinet has agreed that the qualifying threshold is to be changed via a Committee Stage amendment from €175 to €75 in recognition of the challenges facing the sector at this time.”

It should be noted that the VAT Retail Export Scheme does not apply between Ireland and Northern Ireland due to the fact that EU VAT rules on goods apply to Northern Ireland under the Ireland/Northern Ireland Protocol.