Organising your books and readying your accounts for filing can be a daunting task. It is crucial to the success of your business to keep all its financial information up-to-date. As your business grows, bookkeeping tends to get more and more complex. Our bookkeeping experts will keep your books up-to-date, allowing you to focus on your business.
Value Added Tax (VAT) is one of the most complex areas of tax law. The rules around VAT are as complex in Ireland as anywhere else. The VAT regime in the Republic of Ireland follows to a large extent European VAT laws. PricewaterhouseCoopers have suggested that businesses can spend more time battling to comply with VAT than with corporate income tax.
In Ireland, the rules for VAT vary by industry and across goods and services. Recently, the VAT rates have tended to change quite subtly and fairly frequently, too. Yet, inadvertently filing an incorrect VAT return could mean falling foul of VAT Law. The error might trigger an investigation and could result in paying penalties, interest on what you owe, plus a fine.
Given that managing VAT returns can be a time-consuming, complex task that must be done accurately and filed and paid on time, you can see immediately the value of hiring Outbooks to relieve this pressure on your businesses. Our teams of bookkeepers and accountants take care of everything – from advising which category your business falls into to ongoing management of your business’s VAT returns.
Outbooks will take care of all your tax worries, including VAT. We make certain that you are fully compliant with Ireland’s tax law, helping you to register, calculate, pay and reclaim VAT.
The aim of Outbooks’ remote bookkeeping services is to maintain clients’ books in perfect order. We will update your books as per the agreed/desired turnaround time and ensure our work is running efficiently. Whatever we might be working on in your books, we make certain that it runs effectively behind the scenes and never interrupts the routine operations of your business.
Since VAT is a very complex area of tax law where few universal rules and regulations exist, correctly accounting for VAT requires great care and somewhat more than a little rudimentary knowledge.
And while it is true that there are some excellent accounting and bookkeeping software products out there to help businesses deal with their books and accounts these days, the capability of such software is undermined to some extent without good knowledge of the law, rules and calculations of the tax system/VAT system you are working within.
Outbooks exploits such software to make our business more efficient. Our expert teams employ a range of software, technology, and other digitised systems to help us reduce costs for our clients. Our technical capability also allows us to communicate more efficiently with our teams and our clients.
If you are operating as a new business in Ireland you will have to decide whether or not you need to register for VAT. Outbooks can assist you in coming to a decision and continue working alongside your business as it prospers. We can help you prepare if it seems that VAT registration is looking obligatory for your business.
Making your VAT journey seamless, Outbooks leaves nothing to chance: from handling all the paperwork to looking at the VAT schemes you are eligible for, to filing your returns, informing you about what you owe, when you must pay and making sure you claim back as much VAT as possible.
You must register for VAT on time in Ireland. VAT rates vary by industry and across goods and services in the state; the subsequent (typically bi-monthly) filing of your returns must be correct to the letter. Payments of any VAT you owe must be paid right on time.
As already pointed out, carelessness with VAT returns can lead to investigations, penalties, interest charges and fines. Delays or errors in VAT filing, therefore, could mean that cash from your business earmarked for growth, for example, is instead redirected to pay for penalties and interest.
Below, we present a snapshot of the VAT landscape in Ireland and provide a taster of the state’s VAT thresholds.
Rules for businesses based in the state of Ireland
VAT is a complex area of taxation in any nation. The Republic of Ireland follows largely the VAT rules of the European Union.
In Ireland, VAT registration is mandatory if your business is established in the state and exceeds or is likely to exceed the VAT thresholds. These thresholds are:
- €37,500 for the supply of services alone;
- €10,000 for mail-order or distance/intra-community sales of goods, including cross-border telecommunications, broadcasting and electronic (TBE) services into the state. However, it is important to note that there are stipulations in relation to this rule that effect the calculation for the threshold, as it only applies where the supplier is established and has their permanent base, or usually resides, in only one EU Member State. Otherwise the supplier must register for Irish VAT.
- €41,000 is the threshold that applies where acquisitions are made by a trader/business from other EU member states. These are known as Intra-Community Acquisitions (ICA).
- €75,000 for traders supplying goods alone;
- €75,000 for traders supplying both goods and services when 90% or more of turnover is from the supply of goods. However, the 90% figure does not include either:
- Goods sold at the standard or reduced rates of VAT and/or
- Goods manufactured or produced from zero-rated materials.
Rules for businesses not based in the state of Ireland
Irrespective of turnover, a business or trader that is not actually established in the state may need to register and account for VAT if supplying any foreign company providing taxable supplies in Ireland. In this case, the business or trader would need to register for a local VAT number as a foreign company and then record and report any transactions. This can include, for example, the import of goods. Instances where non-resident traders may have to register a foreign company for local VAT include:
- Supplying taxable goods to ‘taxable customers’ in the state of Ireland and/or
- Suppling services to ‘taxable customers’ in the state
Traders, individuals or businesses are supplying goods when:
- They transfer ownership of goods by agreement.
- Sell movable goods on a commission basis, either as an auctioneer or as an agent acting in their own name but under the instruction of another person.
- The exchange of goods under a hire-purchase contract.
- A person handing immovable goods over to another person, including, say, a property which has been developed.
- Seizure of goods by a person with legal authority or acting under statutory authority.
- When an accountable person (that is, a taxable person whether an individual, trader, or company) supplies movable goods to some private user or for an exempt use.
- The appropriation by an accountable person (e.g. landlords or freeholders) of goods other than for the purposes of their business.
- The supply of electricity, gas and any form of power, heat, refrigeration or ventilation.
- Transfer of goods from a business in Ireland by a taxable person to another EU member state where the supply of goods is for business purposes.
Across all Ireland’s tax law and legislation, specifically in relation to VAT registration, bookkeeping and filing VAT returns, Outbooks’ highly trained teams target their expertise to guarantee our clients will meet all their obligations of VAT compliance by all means, including:
- Advising businesses on whether to elect to register for VAT: new business in Ireland can reclaim the VAT on start-up costs, but to do this they must register for VAT.
- Some trades (e.g. sea fishers and farmers, for example) are exempt from VAT; if the turnover of your business is below a certain threshold it, too, may be exempt. So how do you decide if it’s in the best interests of your business to elect to/or not to register for VAT? Outbooks helps you to decide what the most tax-efficient route is.
- We will advise and act on your behalf to make VAT reclaims.
- We will work out the correct VAT thresholds and advise on what goods are not subject to VAT and about any special rules that apply for your business type.
- We will file your VAT return and guarantee that it will be in perfect order.
- We will help you to complete your Return of Trading Details (RTD).
Answer: Established businesses operating in Ireland are obliged to register for VAT if above the VAT threshold. Some businesses not operating in the state but trading with the state should also register for VAT. New business in Ireland that want to reclaim VAT on start-up costs will need to do register for VAT. See more about VAT registration on Revenue website.
Answer: Registration for VAT is done through Revenue Online Service (ROS) if your business is established in Ireland. You should note that most paper copy registration applications are declined.
You can either register for VAT personally or elect an accountant to register for you. Depending on your business structure, one of two online forms will need to be completed:
TR1: for registration of individuals, sole traders, trusts and partners;
TR2: for registration of limited companies.
Answer: VAT registration will normally take effect from the date of the registration for VAT. This date can be backdated by the Revenue Office under certain circumstances. The date the registration becomes effective will be no earlier than the beginning of the taxable period when the application was made.
Answer: If any of the information supplied on the VAT application changes in the interim between application and registration then onus is on the taxpayer to supply the correct information to the Revenue Office within 30 days.
- Standard rate of VAT is 23%. Any goods and services that don’t fall into one of the reduced-rate categories are charged VAT at this rate.
- Reduced rate of VAT is 13.5%. Including coal and heating oil, vets’ fees, building services, agricultural contracting services, car hire (short-term), cleaning, maintenance services and tourism-related activities such as hotels, restaurants, cinemas and hairdressing.
- Second reduced (special rate) rate of VAT is 9%. This rate applies on newspapers, electronically supplied newspapers, e-books and sporting facilities.
- Livestock rate of VAT is 4.8%. This rate applies to agriculture, including livestock (not chickens), greyhounds and the hire of horses.
- Zero rate of VAT applies on all exports. This includes essentials – tea, coffee, milk, bread, books, children’s clothing and footwear – and oral medicines for humans and animals. Providers of these goods charge VAT at 0% rate and can reclaim VAT on their purchases.
- VAT exempt: There is no VAT on certain financial, medical and educational providers.
There are two bases of accounting for Value Added Tax (VAT). These are the:
- invoice basis of accounting; and
- cash basis of accounting.
Normally, you must account for VAT on the goods and services you sell using the invoice basis of accounting. In other words, under this basis, you must account for VAT when you issue the invoice to your customer. But this could mean that you end up having to pay over the VAT owed to Revenue before you receive payment from your customer.
But under the cash basis of accounting – also known as the receipts basis or moneys received basis – you are entitled to wait until payment has been received from your customer before accounting for VAT.
If you are registered for VAT, you may be entitled to use the cash basis for accounting, if:
- your turnover does not exceed or is unlikely to exceed €2 million in a 12-month period; or
- At least 90% of your customers are not VAT registered or entitled to claim a full deduction of VAT on goods you have sold them. This is usually the case if your business sells mainly to private individuals rather than to other businesses.
The VAT Information Exchange System (VIES) is an EU mechanism that includes a system to allow a supplier to apply 0% VAT on the supply of goods.
VIES is used to ensure that the 0% tax rate is being applied correctly and not being abused. Information is shared between domestic and EU tax authorities to help detect unreported movements of zero-rated goods between EU countries.
Businesses can check VAT numbers on the European Commission’s VIES VAT number validation website.
The Value Added Tax Mini-One-Stop-Shop (VAT MOSS) was designed as a simplification measure to reduce the administrative burden for businesses supplying telecommunications, broadcasting and electronic (TBE) services to non-taxable persons, e.g. B2C supplies. However, please note that as of 1 July 2021 the VAT One-Stop-Shop (VAT OSS) replaced VAT MOSS.
From 1 July 2021, if you supply goods cross-border to final consumers, you may be eligible to register for VAT One-Stop-Shop (VAT OSS) and VAT Import-One-Stop-Shop (VAT IOSS). VAT OSS registration means businesses only need to register for a VAT number in one EU member state rather than in all the countries where sales are made. This has made VAT declarations somewhat easier and faster.
When goods or services are bought from a supplier in another EU country the reverse charge VAT rule will apply, making the buyer responsible for reporting the VAT.
The aim of the reverse charge is to apply VAT in the Member State in which the consumer/customer is based, rather than where the supplier is based. This is known as the Member State of consumption. This only applies to B2B transactions.
Many different rules apply to the reverse VAT charge. You can read more about VAT and the reverse charge on the Revenue website.
Your VAT return and payment of whatever you owe must be done either on the 19th of each month or on the 23rd of each month for users registered with the online Revenue ROS system. The VAT cycle is in two-month periods (bi-monthly) commencing on the first day of January, March, May, July, September and November. The following VAT periods can be agreed with the Collector-General in certain circumstances:
- Annual return, if making equal instalments by direct debit;
- Four-monthly returns, if VAT liability annually is between €3,001 and €14,400;
- Six-monthly returns for annual liability of €3,000 or less.
The penalty for not filing a return or not making an electronic payment of what you owe is €1,520. That is, each instance you don’t file electronically the penalty is €1,520 and each instance you fail to pay what you owe on time electronically the penalty is €1,520.
VAT repayments are made directly to the bank account registered to the taxpayer. Repayments may be offset against outstanding tax liabilities and/or outstanding tax return shortfalls.
Some businesses not operating in the state but trading with the state should also register for VAT. If your business is not operating in Ireland, operates in more than one EU member state, or is outside the EU but trading as a ‘foreign company’ to supply goods or services, you must register for ‘non-resident VAT trading’. The VAT thresholds do not apply under this rule and a VAT number must be in place before commencing trade in taxable supplies to traders or businesses in Ireland.
While generally paper applications for VAT registration are not accepted from businesses based in Ireland, business that are not established in the state can send a paper copy of TR1 (FT) or TR2 (FT) to the Revenue of Commissioners in Wexford. There is another form for VAT reclaims (VAT 60A) for non-established taxable persons.
You must register for VAT in Ireland if your business or trade is:
- Importing goods into the EU via Ireland;
- Buying and selling goods within Ireland;
- Running a consignment stock warehouse in Ireland and holding goods prior to onward sale to local companies;
- Organising live events and exhibitions for which an admission fee is charged;
- Are receiving services in Ireland under the reverse charge rule although otherwise a non-VAT trader;
- Selling goods to Irish consumers via the Internet; or
- Self-supplying goods.
See more about non-established traders doing business in Ireland and the full list here.
Note that providers of telecommunications, broadcasting and electronic (TBE) services to consumers in Ireland only have to register for VAT in one EU country under the VAT One-Stop-Shop (VAT OSS) scheme. And these taxpayers only need file a single return that covers all EU member states.
A Return of Trading Details (RTD) form must be completed annually detailing the total purchases and sales for the year, broken down by the VAT rate that applies. Typically, the form will be displayed in the taxpayer’s ROS inbox. The RTD form must be completed and submitted at the end of each tax year depending on when your VAT accounting period ends.
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