Irish coop apex raises concerns on budget hit for non-VAT registered farmers
The Flat-Rate Farmers VAT Scheme is designed to compensate non-VAT registered farmers for VAT incurred on farm inputs and sales, while allowing them to remain outside the standard VAT system. The majority of Irish farmers are not VAT registered
DUBLIN, December 15, 2025 — The Irish Co-operative Organisation Society [ICOS], the voice of cooperatives in Ireland, has raised concerns over a decision by the Department of Finance to reduce the Flat-Rate Farmers VAT top-up from 5.1 percent to 4.5 percent, a measure currently included in the Finance Bill 2026 and due to take effect from January 1, 2026.
The Flat-Rate Farmers VAT Scheme is designed to compensate non-VAT registered farmers for VAT incurred on farm inputs and sales, while allowing them to remain outside the standard VAT system. The majority of Irish farmers are not VAT registered.
ICOS said the proposed reduction means that, in certain circumstances, non-VAT registered farmers will no longer be fully compensated for VAT costs. The organisation has sought clarification from the Department of Finance on the implications of the change.
Where livestock sales are subject to the statutory VAT rate of 4.8 per cent, the reduced flat-rate addition of 4.5 per cent will create a shortfall that did not previously exist, resulting in unequal treatment of farmers depending on how livestock is sold.
ICOS said this effectively amounts to a penalty for non-VAT registered farmers, creating an additional VAT cost when animals are sold through factories, marts or farm-to-farm transactions.
While acknowledging that the flat-rate addition is calculated in line with EU VAT law, ICOS said the interaction between the revised rate and existing VAT rules has produced an unintended and inequitable outcome.
“The flat-rate scheme is meant to be simple, neutral and fair for farmers who are not VAT registered,” said Ray Doyle, Livestock and Environmental Executive at ICOS. “This change creates an anomaly where full VAT compensation is no longer achieved in all cases. On a typical sale of an animal for €1,000, the farmer will lose €2.86 per head, regardless of the sales channel.
“It may not sound like much for a single sale, but when you consider overall livestock sales volumes, this will amount to several million euro in losses across the sector. That was never the intention of the scheme, and it needs to be addressed before the new rate comes into force.”
ICOS said it is calling on the Minister for Finance to remove the anomaly by ensuring that the livestock VAT rate and the flat-rate addition are aligned.
CAP budget concerns
Meanwhile, ICOS has warned that proposed cuts to the EU’s post-2027 agricultural budget could significantly impact farm incomes and threaten the long-term viability of agricultural cooperatives.
The European Union [EU] is currently considering a reduction in Ireland’s Common Agricultural Policy [CAP] allocation from €10.7 billion to €8.6 billion. ICOS said such a cut would create increased uncertainty for farmer-owned cooperatives across the country.
“Ireland’s export-led food industry thrives on the basis of a stable and predictable CAP-backed farming economy,” ICOS said, adding that “the policy certainty that supports our export-led food sector and farmer-owned dairy and mart co-ops is now at risk”.
The organisation said any reduction in CAP funding would have wider ramifications for the rural economy, describing the policy as a “rural economic stabiliser and job-creation foundation” for thousands of people. It warned that reduced funding could discourage young people from entering farming by failing to address existing structural barriers.
ICOS also noted that the proposed budget cuts come at a time when farmers are facing “significantly increased regulatory, environmental and compliance demands”.
More than 7 percent of Ireland’s workforce is employed in the agrifood sector, according to government figures, with the Food Vision 2030 strategy highlighting the central role of cooperatives.
The strategy states that “the co-operative structure is well established in the Irish dairy sector and in key farm and rural-based services”, with a majority of young farmers identifying cooperatives as vital to the future of Irish farming.
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