The blanket “non taxable person” status of public bodies in Ireland has been challenged by the European Commission, which has now requested Ireland to change its legislation.

According to the Commission statement:

“While, according to the Sixth VAT Directive, public bodies should be treated as taxable persons in a number of cases and, at any rate, where doing otherwise would result in significant distortions of competition, Irish public bodies (Government Departments, local bodies and others) are not deemed to be taxable persons under Irish VAT legislation. Accordingly, when they engage in the supply of goods and services they neither charge VAT nor are they entitled to deduct the VAT incurred on their costs.

The Court of Justice has recently confirmed that taxable persons in competition with public bodies which are not being treated as taxable persons are entitled to rely on the relevant provision in the Directive before the national tax authorities.

The Commission has issued a Reasoned Opinion requesting that Ireland amend its legislation within two months of its receipt.”

The case referred to is the Feuerbestattungsverein Halle case decided in June this year.