Revenue Clarifies VAT On SMS Charitable Donations
The Office of the Revenue Commissioners has released a brief clarifying the correct value-added tax (VAT) treatment applicable in respect of charitable donations made via mobile telephone text message shortcodes.
Ireland's standard 21% VAT rate is currently levied on the provision of telecommunications services. However, the Revenue has stressed, charitable donations are outside the scope of VAT, because they are not deemed to be consideration for the supply of a service.
The Revenue states that, generally speaking, the donations in question are made where an individual texts an SMS shortcode specific to a charity, with the intention of donating money to that charity. Following receipt of that text message, a separate message is sent to the individual and the amount given by the donation is debited to their bill or to their pre-paid phone credit, whichever is the relevant means of payment.
Telecommunications providers may either charge a fee for facilitating the transaction, or waive it.
In these instances, the Revenue has made clear that:
- Where the full amount of the donation is passed over directly to the charity concerned - ie. the provider does not charge a transaction fee - the entire amount is deemed outside the scope of VAT. The amount involved is classed as a charitable donation, and because the operators have waived their fee, is not regarded as consideration for the supply of a telecommunications service.
- Where the telecommunications provider charges a fee for facilitating the transaction, then they are obliged to charge VAT at the standard rate on this fee. The Revenue gives the following example: where EUR1 is donated but EUR0.1 of this is deducted as a fee, then that EUR0.1 will be liable to the 21% VAT rate. The remaining EUR0.9, assuming it is passed in full to the charity, is considered a donation, and no VAT will apply to this.
Where other parties, such as those providing technical support, are involved in the process charge fees, those fees are also liable to VAT.