Food Supplements VAT Update
by Ciaran Hurley
Throughout 2014, Revenue has continued to implement its policy of applying VAT to food supplements other than vitamins, minerals and fish oils. They are also seeking the application of VAT to vitamins, minerals and fish oils that are marketed for skin, hair and nail health.
Revenue maintains that this policy, as set out in eBrief 70/11, was warranted by the ruling in 2011 in the sports nutrition case, which was eventually settled in Revenue’s favour in October 2013. Moreover, they believe that the implementation of eBrief 70/11 was given full effect by the settlement of the sports nutrition case in October 2013.
The eBrief states that food supplements may qualify for the zero VAT rate, if they are intended to provide sustenance and if the ingredients would be regarded as food by the average person. Revenue accepts that, in general, these criteria are satisfied in respect of vitamins, minerals and fish oils. However, most other food supplements must be submitted to Revenue, for agreement, if traders wish to supply them at the zero VAT rate.
Revenue's position regarding the necessity for product submissions was reiterated by the Minister for Finance in an answer to a Dáil question on 23rd October.
The Minister for Finance, Michael Noonan, was asked a question about the VAT treatment of food supplements, such as Probiotics and Glucosamine, and he replied that “the two supplements mentioned by the Deputy could be a zero-rated food supplement or one liable at the standard rate but there is insufficient information provided to make such a determination. I would suggest that the Deputy provide details of the supplements to which he refers to the Revenue Commissioners who will advise on their correct VAT treatment as appropriate”.
This means that submissions must often be made for particular brands and not just for the ingredients used in the formulation of those brands. Of course, this policy applies to many different food supplements and not merely to the two substances referred to in the Dáil question.
Revenue has also ruled that any potential therapeutic use of a food supplement may disqualify that product from the benefit of the zero VAT rate. This is one of the main reasons for their policy to assess products by individual brand since the same ingredients can often be used for different purposes, depending on the brand in which the ingredients are used.
Revenue has recently raised a number of VAT assessments in respect of food supplements that had not been submitted to them for rulings. Therefore, it is important that submissions are made for all products, other than vitamins, minerals and fish oils, if traders wish to continue to supply these products at the zero VAT rate.
Revenue has been advised of the trader's entitlement to continue the supply of a food supplement at the zero VAT rate pending the receipt of the VAT ruling.
Revenue has already ruled that VAT is applicable to a number of mainstream food supplement brands including probiotics, glucosamine, lutein and co-enzyme Q10. Appeals have now been lodged in all of these cases.
The appeals process will most likely result in the VAT status of the product brands concerned being determined by an independent third party. Pending the outcome of these appeals, Revenue has similarly been advised that traders are entitled to continue the supply of the particular brands involved at the zero VAT rate. Of course, traders may continue to submit other brands of probiotics, glucosamine, lutein and co-enzyme Q10 to Revenue, for determination of their appropriate VAT rates, in accordance with the established procedures for new product submissions.
It should be noted that the entitlement to continue the supply of products at the zero VAT rate is not officially recognised by Revenue nor is it provided for in tax legislation. However, it is significant that Revenue did not seek payment of VAT for the products affected by the sports nutrition ruling for the two year period during which that ruling was under appeal. Therefore, it is equitable that the same position should obtain for other products, until their final VAT status is determined.
On a positive note, it is reassuring that the Minister did not suggest that VAT should apply to most food supplements, as had been indicated by him in his reply to a previous Dáil question in 2013. On the present occasion, the Minister referred only to the specific products that were involved in the sports nutrition case and he recognised that all other products could potentially qualify for the zero VAT rate, subject to Revenue agreement.
CKH Services, 1st December 2014
Throughout 2014, Revenue has continued to implement its policy of applying VAT to food supplements other than vitamins, minerals and fish oils. They are also seeking the application of VAT to vitamins, minerals and fish oils that are marketed for skin, hair and nail health.
Revenue maintains that this policy, as set out in eBrief 70/11, was warranted by the ruling in 2011 in the sports nutrition case, which was eventually settled in Revenue’s favour in October 2013. Moreover, they believe that the implementation of eBrief 70/11 was given full effect by the settlement of the sports nutrition case in October 2013.
The eBrief states that food supplements may qualify for the zero VAT rate, if they are intended to provide sustenance and if the ingredients would be regarded as food by the average person. Revenue accepts that, in general, these criteria are satisfied in respect of vitamins, minerals and fish oils. However, most other food supplements must be submitted to Revenue, for agreement, if traders wish to supply them at the zero VAT rate.
Revenue's position regarding the necessity for product submissions was reiterated by the Minister for Finance in an answer to a Dáil question on 23rd October.
The Minister for Finance, Michael Noonan, was asked a question about the VAT treatment of food supplements, such as Probiotics and Glucosamine, and he replied that “the two supplements mentioned by the Deputy could be a zero-rated food supplement or one liable at the standard rate but there is insufficient information provided to make such a determination. I would suggest that the Deputy provide details of the supplements to which he refers to the Revenue Commissioners who will advise on their correct VAT treatment as appropriate”.
This means that submissions must often be made for particular brands and not just for the ingredients used in the formulation of those brands. Of course, this policy applies to many different food supplements and not merely to the two substances referred to in the Dáil question.
Revenue has also ruled that any potential therapeutic use of a food supplement may disqualify that product from the benefit of the zero VAT rate. This is one of the main reasons for their policy to assess products by individual brand since the same ingredients can often be used for different purposes, depending on the brand in which the ingredients are used.
Revenue has recently raised a number of VAT assessments in respect of food supplements that had not been submitted to them for rulings. Therefore, it is important that submissions are made for all products, other than vitamins, minerals and fish oils, if traders wish to continue to supply these products at the zero VAT rate.
Revenue has been advised of the trader's entitlement to continue the supply of a food supplement at the zero VAT rate pending the receipt of the VAT ruling.
Revenue has already ruled that VAT is applicable to a number of mainstream food supplement brands including probiotics, glucosamine, lutein and co-enzyme Q10. Appeals have now been lodged in all of these cases.
The appeals process will most likely result in the VAT status of the product brands concerned being determined by an independent third party. Pending the outcome of these appeals, Revenue has similarly been advised that traders are entitled to continue the supply of the particular brands involved at the zero VAT rate. Of course, traders may continue to submit other brands of probiotics, glucosamine, lutein and co-enzyme Q10 to Revenue, for determination of their appropriate VAT rates, in accordance with the established procedures for new product submissions.
It should be noted that the entitlement to continue the supply of products at the zero VAT rate is not officially recognised by Revenue nor is it provided for in tax legislation. However, it is significant that Revenue did not seek payment of VAT for the products affected by the sports nutrition ruling for the two year period during which that ruling was under appeal. Therefore, it is equitable that the same position should obtain for other products, until their final VAT status is determined.
On a positive note, it is reassuring that the Minister did not suggest that VAT should apply to most food supplements, as had been indicated by him in his reply to a previous Dáil question in 2013. On the present occasion, the Minister referred only to the specific products that were involved in the sports nutrition case and he recognised that all other products could potentially qualify for the zero VAT rate, subject to Revenue agreement.
CKH Services, 1st December 2014