vat digital.com - Ireland VAT Guide

Introduction

Value-Added Tax (VAT) is a tax, which is payable on sales of goods or services within the territory of the Member States of the EU. The tax, in all cases, is ultimately payable by the final consumer of the good or service. Each party in the chain of supply (manufacturer, wholesaler and retailer) acts as a VAT collector.

They collect VAT from their customer and include that VAT in their VAT return to Revenue. When returning the VAT collected, they can reclaim as appropriate, VAT which has been charged to them by their suppliers.

Current VAT Rates (Effective 1 January 2023)

Standard rate (23 %)
Reduced rate (13.5 %)
Second reduced rate (9 %)
Livestock rate (4.8 %)
Flat-rate compensation percentage for Farmers (5 %)

Accountable Person

An accountable person is a taxable person (for example, an individual, partnership, company) who:

supplies taxable goods or services in the State

and

is registered or required to register for VAT.

As such they are required to charge VAT in the State.

Taxable Person

A taxable person is any person who independently carries out a business in the European Union (EU) or elsewhere. It includes persons who are exempt from Value-Added Tax (VAT) as well as flat-rate (unregistered) farmers.

Exemption From VAT

Where a taxable person supplies only exempt goods or services, they are not generally entitled to register for Value-Added Tax (VAT).

However, in specific circumstances the trader may be required to register and account for VAT. This occurs where the trader makes intra-Community acquisitions, or is in receipt of services from abroad. Likewise, a taxable person who also supplies taxable goods or services may be required to register for VAT.

However, VAT registration relates to your taxable supplies. Therefore, if you carry out both exempt and taxable activities, you can only reclaim VAT relating to your taxable activities.

VAT Registration

Generally, you must register for VAT if you are an accountable person.

A person carrying out only exempt activities or non taxable activities may not register for VAT. However, a person carrying on exempt activities or non taxable activities may have to register for VAT in certain situations, for example:

acquiring goods from other Member States

receiving services from abroad.

If you have set up a business but have yet to supply taxable goods or services, you may reclaim VAT on your start-up costs. However, to do so you are required to register for VAT.

This will enable you to obtain credit for VAT on purchases made before trading begins.

Traders whose turnover is below the VAT thresholds, farmers and sea fishers are not generally obliged to register for VAT. They may, however, elect to register for VAT.

VAT Registration Thresholds

Value-Added Tax (VAT) registration is obligatory when your turnover exceeds, or is likely to exceed, the VAT thresholds. The thresholds depend on your turnover in any continuous 12 month period.

The threshold for intra-Community distance sales of goods and cross-border telecommunications, broadcasting and electronic (TBE) services relies on your turnover in a calendar year.

If the turnover is less than a threshold limit, you may elect to register for VAT.

The principal thresholds are as follows:

€37,500 in the case of persons supplying services only.

€10,000 for taxable persons making mail-order or intra-Community distance sales of goods and cross-border TBE services into the State. The threshold is calculated by taking account of the suppliers, or deemed suppliers, total value of intra-Community distance sales of goods and cross-border TBE services to customers in all European Union (EU) Member States. The threshold only applies where the supplier is established and has their permanent address, or usually resides, in only one Member State. Otherwise the supplier must register for Irish VAT in respect of such supplies. See the intra-Community distance sales of goods and the Electronically supplied services webpages for further information.

€41,000 for persons making acquisitions from other EU Member States.

€75,000 for persons supplying goods.

€75,000 for persons supplying both goods and services where 90% or more of the turnover is from the supplies of goods. However, while all goods and services are part of the turnover, the 90% does not necessarily include all goods sold.

The 90% figure does not include goods which you:
- sold at the standard or reduced rates
- and
- manufactured or produced from zero rated materials.

A person, while not established in the State, needs to register and account for VAT if that person supplies:

taxable goods to ‘taxable customers’ in the State
or
services to ‘taxable customers’ in the State.

This applies irrespective of the level of turnover.

How is Turnover Determined

Your turnover figure may exceed the threshold limit. However, you may not be required to register for VAT.

For registration purposes, the turnover figure may be reduced by the amount of VAT paid on stock bought for re-sale. You should use this reduced turnover figure to see if you can register for VAT.

This adjusted turnover figure is used only for the purposes of determining your turnover for registration for VAT.

Example

Michael has an annual turnover of €80,000.

He has incurred VAT on his stock purchased for re-sale in the amount of €11,220.

Michael can reduce his turnover figure by the €11,220 when determining whether he has breached the threshold.

€80,000 minus €11,220 equals €68,780.

As the adjusted turnover is below the registration limit of €75,000, he is not obliged to register.

Requirement to Register where Goods or Services Purchased from Abroad

Usually the following persons would not need to register for Value-Added Tax (VAT) in the state:

Non VAT registered businesses
Exempt businesses such as banks
Public bodies such as local authorities, State agencies and semi-State bodies
Farmers, fishers or race horse trainers.

But they may have to register and account for VAT, for received taxable services from outside the State or Intra-Community Acquisitions.

Exempt and Certain Non Taxable Persons Acquiring Goods Within the EU

Exempt persons and certain non-taxable persons are obliged to register and account for VAT in certain situations. Such situations include where they buy or are likely to buy, goods from other Member States. You need to register when the goods exceeds, or are likely to exceed €41,000 in any 12 month period.

Flat-rate farmers, fishers and race-horse trainers may be required to register in respect of receiving such goods, subject to the relevant threshold. They can retain their unregistered status in respect of their farming or fishing activities.

You may not reclaim VAT if you are an exempt or non-taxable person.

Exempt and Certain Non Taxable Persons Receiving Services From Abroad (Reverse Charges)

Exempt persons and certain non-taxable persons must register and account for VAT if they receive taxable services from abroad. This obligation arises irrespective of the value of those services.

Flat-rate farmers, fishers and race-horse trainers need to register if they receive such services. They can retain their unregistered status in respect of their farming or fishing activities.

You may not reclaim VAT if you are an exempt or non-taxable person.

Paying VAT on Services Received from Abroad (Reverse Charges)

You must pay VAT on the invoiced amounts at the appropriate Irish VAT rate to Revenue in your periodic VAT return. You may qualify to reclaim the VAT at the same time.

By passing your VAT number to the supplier, you will avoid paying VAT in the other Member State.

For More Information on Registering for VAT Click this Link Registering for VAT

Other Key Areas of VAT