VAT of 13.5% is to be introduced on certain food supplements as part of the Finance Bill which Finance Minister Paschal Donohoe has said will be published tomorrow.

The Finance Department said that certain products will not be impacted by the change introduced in the Bill, including foods for specific groups, and vitamins and minerals such as folic acid and fortified foods. 

These products will continue to see a zero rating for VAT purposes.

A spokesperson for Revenue said the new VAT rates will be applied to food supplements from January 1, 2020. 

The VAT move was due to be implemented last March but was postponed to allow time for a public consultation. 

A spokesperson for the Department of Finance said the move is expected to be revenue neutral because some food supplements currently VAT rated at 23% will be reduced while some zero rated products will now be subject to 13.5% VAT.  

Food for specific groups, such as infant formula, fortified foods like cereals and yogurts and human oral medicines licensed or authorised by the Health Products Regulatory Authority as medicine will continue to be zero rated.

The Irish Health Trade Association has today expressed shock, dismay and disbelief at the decision to impose VAT at a rate of 13.5% on some food supplements.

The IHTA represents manufacturers, importers, and distributors of specialist health products in Ireland. 

"We believed that the absence of this in budget 2020 was in recognition of the damage which a no deal Brexit will have on the cost of food supplements,  Phil Costigan, of the IHTA said. 

Phil Costigan said the Minister had assured the public that Budget 2020 was a "Brexit Budget" in order to protect citizens, but he added that nothing could be further from a no deal Brexit Budget than this decision. 

She said that if the UK crashes out of the EU on 31 October, new customs tariffs will apply to goods traded between the UK and Ireland.  

"These new tariffs, on top of the 13.5% VAT increase announced by the Minister, could see food supplements rising in price by 26.3% once implemented," Ms Costigan stated.

"This increase will see a major decline in health supplement consumption, a massive knock-on impact on the health of citizens, and a dangerous move to online unregulated purchases and a threat to hundreds of retailers across Ireland," she added.

The Finance Bill 2019 - to be published tomorrow - will give effect to the measures announced in last week's Budget. 

The bill will run to 75 sections and includes the necessary legislative provisions to provide for the tax changes announced in the Budget as well as introducing some necessary anti-avoidance and technical changes to the tax code.

Minister Donohoe stated that the Finance Bill 2019 sets out the legislative provisions to bring effect to the tax measures announced in Budget 2020 against the background of uncertainty posed by Brexit. 

"The Finance Bill implements a range of targeted tax changes including specific measures to support business and to address climate change," Mr Donohoe said. 

"The Bill also contains a number of anti-avoidance and administrative changes to the tax code in order to protect and enhance the integrity of our tax base," he added. 

Among the many changes, the Finance Bill 2019 provides for an increase in the Home Carer Tax Credit from €1,500 to €1,600 and also sets out an increase in the Earned Income Credit from €1,350 to €1,500.

It also seeks to extend both the Special Assignee Relief Programme (SARP) and the Foreign Earnings Deduction (FED) schemes to the end of 2022.

The new Finance Bill also provides for the extension of the Help to Buy scheme in its current form to the end of 2021, while the Living City initiative is also set to be extended.