VAT reduction & pricing – knowing your business obligations

September 1, 2020

As part of the Government’s July Stimulus Package, the standard rate of VAT has been reduced from 23% to 21%, effective from today [1 September 2020] until 28 February 2021. This reduction applies to a wide range of goods and services including, for example, the sale of motor vehicles, adult clothing, alcohol, electrical goods, most household goods, professional services, telecommunications etc. It is important that businesses understand their obligations when setting and displaying new prices as, even during a temporary VAT reduction, the rules still apply.

Price display

As a result of the temporary VAT reduction, many businesses will be reviewing their prices. The Competition and Consumer Protection Commission is encouraging businesses, where feasible, to consider passing some or all of the saving on to consumers. However, it is important to note that businesses are not obliged to pass on the VAT saving and are free to set and review their prices at any time.

Regardless of if a business decides to raise, reduce or maintain their current prices, under S.I. No. 639/2002 – European Communities (Requirements to Indicate Product Prices) Regulation 2002, businesses must adhere to a number of requirements on how they indicate or display their prices to consumers. In general, businesses must display the selling price (inclusive of VAT) of every item offered for sale. For particular products (such as fruit and vegetables) traders are also required to indicate the unit price of the product (price per kilogram, price per litre) and should make it clear what particular item the selling price and/or unit price relates to.  These requirements serve two principal purposes, they improve consumer information and facilitate the proper comparison of prices by consumers.

In addition, certain types of business have more specific and detailed obligations relating to price displays. These businesses include:

These businesses are required to display prices in a particular way so that consumers can easily compare prices without committing themselves to purchasing in that premises. Businesses who are adjusting their prices based on the VAT reduction must ensure that the prices displayed are the total prices and are displayed correctly according to their business type.

Businesses should be aware that although the VAT reduction applies for a limited period of time (i.e. six months) they are still required to provide adequate and accurate pricing information to consumers at all times.

Click here for more information and guidance on product pricing and display.

Setting prices – independently

Businesses are also reminded that any pricing decisions must be made independently. Businesses or representative bodies co-ordinating, suggesting or collectively agreeing set prices is not acceptable and could constitute an infringement of competition law.

Click here for more information and guidance on coordinated actions by competitors.

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