Value Added Tax
- Foreign Traders
- Section 13A
- Foreign Visitors
- Holiday Homes
- Travel agents margin scheme
- Payment and Compliance
- Cash Receipts
- Anti Avoidance
- New VAT on Property Rules
- Reverse charge mechanism in the Construction Sector
- Partial VAT Rebate on certain Company Cars
Value Added Tax (VAT) is a tax on consumer expenditure and is charged when a taxable person supplies goods or services in Ireland in the course or furtherance of its taxable business. It is also chargeable on the purchase of specified services from supplier’s abroad, on imported goods and on intra-community acquisitions of goods.
Registration is compulsory if turnover exceeds the following limits.
- Persons supplying services €37,500 per annum
- Persons supplying goods €75,000 per annum
- Intra community acquisitions & fourth schedule services €41,000 in a 12 month period
Foreign traders supplying taxable services in Ireland or selling goods from stocks held in Ireland are obliged to register for Irish VAT. Such traders do not have the benefit of the above registration thresholds unless they have a fixed place of business in Ireland . Where a non- resident person provides entertainment/cultural activities in the State, the reverse charge mechanism applies to the recipient.
A premises provider who allows non-established vendors to operate from his/her premises must notify Revenue if he/she allows such a vendor operate from their premises for less than 28 days (previously less than 7 days).
Certain goods and services are exempt from V.A.T. e.g. all pre-school education facilities, promotion of and admission to live theatrical performances.
The rates of VAT and the main categories to which they apply are:
|Goods and services not subject to one of the other rates i.e. standard rate.(21% prior to 1 January 2012)||23|
|Exported goods, fertilisers, books, food and oral medicine, children’s clothing and children’s footwear.||0|
|Livestock, live greyhounds and hire of horses||4.8|
|Real property, building services, newspapers, hotel and holiday accommodation, short term car and boat hire, tour guide services and certain agricultural services and sports facilities.*||13.5|
|Heating fuel, electricity, restaurant services, cinema and cabaret admission, hot take away foods, waste disposal services, admission to exhibitions, the services of veterinary surgeons, cakes and non-chocolate biscuits.||13.5|
|Hairdressing and other similar services, repair and maintenance of movable goods, photographic services, laundry and drycleaning and driving instruction.*||13.5|
|Supply of horses not intended for the preparation of foodstuffs or for use in agri-production, hire of horses, supply of greyhounds, restaurant and catering services, hotel and holiday accommodation and other tourism related services.||9|
|The supply of most banking services, insurance services,education and training, medical services, passenger transport,funeral undertaking, lotteries and services of trade unions. Provision of golfing facilities by non-profit making bodies, and defined contribution pension schemes (from 1 March 2015)||exempt|
Taxable persons may be authorised to import and make intra-community acquisitions of goods and to purchase goods and services in the state without having to incur the VAT normally chargeable if at least 75% of their annual turnover is comprised of exports and/or zero rated intra-community supplies.
A penalty of €4,000 applies for every VAT period in which the taxpayer fails to notify Revenue that they no longer satisfy the conditions requires for VAT 56 authorization.
Non-EU visitors who purchase goods in Ireland and export them in their personal baggage can claim a VAT refund when they leave the EU.
An individual who elects to become taxable in respect of the letting out of a holiday home will be subject to a partial claw back of the VAT reclaimed on the purchase of the property if he cancels the registration within 10 years of the date of election.
This scheme applies to Tour Operators and travel agents. The profit margin realised on the sale of travel packages will be subject to VAT at 21%. Vat will also apply to the profits realised on hotel reservation companies.
VAT incurred on conference accommodation in Ireland when it is supplied under TAMS is not recoverable.
Taxable persons are obliged to register for VAT and submit bi-monthly returns by the 19th of the month (23rd where filed online via ROS) following the two month period in respect of supplies and purchases made in the two-month period. Unpaid tax attracts simple interest at the rate of.0274% per day.
Certain authorised persons may submit VAT returns on an annual basis rather than on the bi-monthly basis, and pay their VAT liability by direct debit, if permitted.
Certain interest penalties arise where insufficient VAT is remitted on the direct debit system. Where the balance of tax remaining to be paid by the authorised person at the end of the accounting period exceeds 20% of the actual liability for that period, simple interest is chargeable from a date six months prior to the date on which the authorised person is requires to furnish the annual return.Where returns and payments are submitted electronically via ROS the due date will be extended to the 23rd of the month.
Where input tax has been reclaimed and the consideration has not been paid for six months the input tax referable to the unpaid invoice must be repaid to Revenue. If the consideration is subsequently paid an adjustment applies. This amendment has effect in respect of tax deducted in taxable periods commencing on or after 1 January 2014.
A new fixed penalty of €4,000 applies in respect of;
- Failure to submit a VIEs return in respect of services
- Failure to provide specified documentation on a lease surrender or assignment of certain leases created before July 2008.
- Failure to provide documentation in relation to property transfers as part of a business sale.
- Failure to maintain the VAT history of properties held.
Some taxable persons may elect to account for their VAT liability on the basis of cash received in a taxable period rather than on the basis of sales. This is generally available where the primary supply of goods and services is to persons who are not registered for VAT or where the individuals turnover is less than €2,000,000. The cash receipts basis will not be available where a discount is given to a customer after the supplier issues a VAT invoice where no credit note has been issued in respect of the discount, in effect this makes the supplier liable to VAT on the discount.
A VAT return may be submitted by another person authorised to do so by the taxable person. Such a return is treated as if the taxable person supplied it for the purposes of the VAT Acts.
Margin Scheme – Second Hand Motor Vehicles and Agricultural Machinery
Dealers in second hand vehicles and agricultural machinery may opt to apply VAT to their profit margin in Sales. The dealeris not entitled to claim residual VAT in their purchase price and simply accounts for VAT @ 23% in the profit margin.
VAT on Property rules
Commercial property transactions are subject to the following provisions:
• There is no VAT charge on the capitalised value of long leases.
• There is no distinction between short leases and long leases.
• There is an exemption from tax for all leases with an option to tax.
• The supply of new properties within the first five years is liable to VAT.
• The supply of old properties is exempt from VAT with a joint option to tax.
• A capital goods scheme will apply to properties for up to 20 years to readjust VAT recovery in line with the level of recovery entitlement of the business.
A site which is transferred as part of the value of a new house or apartment is subject to VAT.
Substantial amendment of how VAT applies to property transactions was introduced, on 1 July 2008. The changes are designed to simplify the rules that apply to VAT on property however they are complex particularly because transitional rules will apply to VAT on property transactions and care should be exercised and specialist advice sought when dealing with such transactions, The new rules will apply to both residential and commercial property supplied in the course of business. The VAT charge on sales of residential property remains unchanged. The key changes being introduced for commercial property transactions are listed below:
- Cessation of VAT charge on the capitalized value of long leases.
- No distinction between short leases and long leases.
- An exemption from tax for all leases with an option to tax.
- The supply of new properties within the first five years is liable to VAT.
- The supply of old properties is exempt from VAT with a joint option to tax.
- A capital goods scheme will apply to properties for up to 20 years to readjust VAT recovery in line with the level of recovery entitlement of the business.
A reverse charge mechanism for VAT on supplies made by a subcontractor to a principal contractor in the construction sector was introduced.
A reverse charge means that instead of the subcontractor charging VAT on his supply to a principal and accounting to Revenue for the VAT, the principal contractor will account to Revenue for the VAT. Both the subcontractor and the principal will continue to claim input credits.
With effect from 1 May 2012 the reverse charge rules for the construction sector have been extended to any person connected to the builder and not just the principal contractor. The definition of connected is wide and includes persons or bodies of persons connected by family or other personal ties, management, ownership, control, common purpose and certain legal ties.
A business engaged in fully VATable services may claim an input credit of 20% (a reduced amount applying for partially VATable activities) of VAT incurred on the purchase or hire of company cars that are used at least 60% for business purposes. The input credit will only apply to cars within the scope of Bands A,B or C for VRT purposes and which are registered after 1 January 2009. If the car is disposed of or ceases to meet the 60% business test within 2 years, some or all of the VAT reclaimed will be clawed back by Revenue.