Revenue Tax Briefing

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Revenue Tax Briefing Issue 27, August 1997

Finance Act 1997 Changes - Retail Export Schemes

Retail Export Scheme

The Retail Export Scheme is a scheme of VAT relief for purchases made by non-EU tourists. Provided certain conditions are met, eligible supplies to tourists can benefit from the zero rate of VAT applicable to exports.

To strengthen Revenue control of the scheme, Section 106 of the Finance Act allows goods to be zero-rated only when specific conditions are met.

Subsection (a) of Section 106 inserts three new subsections (1A), (1B) and (1C) in Section 13.

Subsection (1A) - Conditions for zero-rating

New subsection (1A) provides that goods exported under the retail export scheme are zero-rated provided that a number of conditions are met. To qualify for zero-rating:

  • The goods must be exported by or for the tourist by the end of the third month after the sale
  • The tourist must get the refund in a timely manner
  • Any commissions and charges must be explained to the tourist
  • A fair exchange rate must be used in any currency conversions
  • Traders must keep adequate records of all sales made under the scheme.

Subsection (1B) - Authorisation procedure

New subsection (1B) allows the Revenue Commissioners to introduce an authorisation procedure, if necessary, for categories of persons who wish to make zero-rated supplies to non-EU tourists. Revenue envisages that this procedure will only be used if it becomes necessary to do so in the best interests of visitors using the scheme.

Subsection (1C) - VAT refunding agents

The existing VAT refund companies are not formally structured as VAT refunding agencies. Instead, they have devised arrangements with retailers under which the refund company is, legally, the supplier of the goods to the tourist. The refund company regards the actual retailers participating in the scheme as its agents.

The new subsection (1C) recognises the concept of a straightforward VAT refund agency and would allow any VAT refund company wishing to do so to simplify its administrative set-up.

Subsection (b) of Section 106 inserts new subsections (3B) and(3C) into Section 13 of the VAT Act. The new subsection (3B) provides definitions

“Traveller” defines people who are eligible to avail of the provisions of the retail export scheme. Essentially these are non-EU tourists. But note that EU residents taking up residence outside the Community for a period of 12 months also qualify.

“Traveller’s qualifying goods” sets out the conditions that goods purchased by travellers must meet. A tourist can purchase all goods (except goods for the fuelling, provisioning and equipping of pleasure boats, private aircraft or other private means of transport) under the scheme provided that the goods are taken out of the EU within three months from the end of the month in which they are purchased. For example, goods sold during the month of January must be exported by 30 April.

“VAT refunding agent” is a person who arranges the repayment of tax incurred by a ‘traveller’ on goods purchased under the scheme.

Section 109 of the Finance Act amends Section 25 of the VAT Act to give a person a right of appeal against a refusal by the Revenue Commissioners to authorise him or her to operate the VAT Retail Export Scheme.

Section 111 amends the Second Schedule to the VAT Act to allow the zero-rating of goods under the Retail Export Scheme and the zero-rating of any service charges for operating such scheme providing the required conditions and regulations set out in the new Section 13(1A) are met.

All changes in relation to the Retail Export Scheme come into effect from 1 July 1997.