VAT exemption on respirators and energy

VAT exemption on respirators and energy

The Minister of Finance has extended the VAT waiver on the supply of respirators, including their purchase from another Member State and import, until the end of 2021. It has newly waived VAT on the supply of electricity and/or gas for November and December 2021.

The VAT remission on the supply of respirators has been with us for some time, so there is no interpretative ambiguity. However, this does not apply to the VAT remission on the supply of electricity and gas.

If you domestically supply goods as defined in the GFD Information dated 2 February 2021 (especially FFP2, KN95 or N95 respirators) or purchase these goods from abroad, you do not deduct VAT. However, the right to deduct on the purchase remains. For the record, nanofiber masks did not qualify for the waiver privilege.

The waiver of VAT on energy is mainly aimed at reducing the financial burden on the population due to the significant global increase in electricity and gas prices. Unfortunately, due to considerable uncertainties and technical issues, it is possible that suppliers will ignore the waiver, citing the direct effect of the European VAT Directive.

The VAT waiver on gas and electricity applies to supplies with a date of taxable supply in November and December 2021. The waiver also applies to advances that would otherwise be liable for VAT paid in those months.

The GFD has sought to clarify most of the ambiguities in the decision to waive VAT on energy in two hastily issued information notes (dated 20 and 27 October 2021). Here is a brief summary:

  • In the context of the entire decision, it clear that at issue is any gas that is:
    a) intended to be used or offered for sale for the purpose of propelling engines; or
    b) intended to be used or offered for sale for the production of heat, irrespective of the method of consumption of the heat.
  • Therefore, the tax exemption covers, among other things, gas supplied for the production of heat in households and domestic boiler rooms (i.e. for cooking or heating), for the production of electricity or for the combined production of electricity and heat in generators, for the propulsion of engines such as LPG or CNG, as well as gas used in metallurgical processes. This gas can thus be supplied not only through the distribution system but also in tankers, cylinders (typically propane butane cylinders), etc.
  • Only in cases where the actual consumption is determined otherwise than by a reading from a meter (typically subsequent calculation of consumption per individual dwelling or non-residential premises where no metering equipment is installed, e.g. by floor area, etc.) or in situations where, although the reading from the meter is taken first, it is reasonable to carry out other necessary calculations (determination of distribution losses, etc.), can the date of determination of the actual consumption be regarded as the date of taxable supply.
  • In the case of a supply of a gas cylinder, for example, the standard date of taxable supply is determined in accordance with Article 21(1)(a) of the VAT Act, i.e. on the date of supply.
  • If consideration is received prior to the taxable supply, the obligation to declare tax on the amount received arises on the date of receipt of the consideration (advance). This means that the decision applies only to advances paid in the last two months of the year.
  • If the date of taxable supply occurs later, for example in February 2022, and an underpayment arises again, this will again be advantageous for non-payers and payers who are not fully entitled to the deduction. VAT is waived on advances paid in the last two months of 2021, so instead of being paid to the state, the full payments will be credited against the energy bill.
  • The remission is reported on line 26 of the tax return. This line is also used by taxpayers who purchase the waived gas or electricity from abroad or under the reverse charge regime. The waiver is not reported in the control report.
  • According to the tax administration, suppliers must apply the waive.
  • Furthermore, the tax administration insists that taxpayers claiming VAT deductions are not entitled to deduct VAT if the supplier indicates the (waived) tax on the invoice.
  • For the two months in question, the payment schedule is not considered to be an invoice; according to the tax administration, it is only a prescription for payment. In practice, both payment and payment schedules can cause problems. We recommend that any claim for VAT deduction from these schedules always be assessed individually.