Deposit Return Scheme
The Deposit Return Scheme is an initiative to support the recycling of certain empty drinks containers. It was introduced under environmental law by the Separate Collection (Deposit Return Scheme) Regulations 2021 (S.I. No. 599 of 2021). The Scheme came into operation on 1 February 2024.
Under the Scheme:
- a small refundable deposit is charged on drink products supplied in plastic bottles or in cans
- the deposit is charged at each stage of the supply chain when the drink product is supplied
- the deposit is refunded to a person who returns the empty container to be recycled or reused
- and
- the empty container can be returned to a retailer or other collection point.
Is VAT charged on the deposit?
Value-Added Tax (VAT) does not arise on deposits when drink products are supplied by businesses in a supply chain. Examples of such businesses are:
- manufacturers
- importers
- wholesalers
- and
- retailers.
Under VAT law, the deposit amount is regarded as nil when the drink product is moving through the supply chain.
Businesses supplying Deposit Return Scheme products should calculate VAT on the deposits by applying the standard rate of VAT. However, because the deposit amount is legally deemed to be nil, the result of the VAT calculation is also nil. It means such businesses have no VAT liability relating to the deposit. It also means that a consumer who purchases a drink product is not charged VAT on the deposit.
A VAT liability arises on the deposits relating to containers that are not returned to the Deposit Return Scheme. Under VAT law, only the Scheme Operator must account for and pay VAT relating to deposits on unreturned containers. This liability does not affect the consumer or any of the businesses in the supply chain for the product.
Is VAT charged on the underlying drink product?
For businesses supplying Deposit Return Scheme products, VAT arises on the underlying product in the normal way. This liability is not affected by the deposit.
Further guidance contains more detailed information on the VAT treatment of the Deposit Return Scheme.