The law of VAT in Ireland is a complex & continually evolving area of Ireland’s taxation structure. Without doubt this is where the most costly errors are made by Irish businesses. With expert advice and knowledge many of these errors can be avoided.
Here is a summary of our most common DOs & DON’Ts based on cases that we encounter on a daily basis:
DO Register for VAT when the obligation to do so applies to your business.
- For businesses in the domestic market only, this can be relatively straightforward as the turnover thresholds for supplying services (€37,500 per annum) and goods (€75,000 per annum) are the main indicators.
- Domestic businesses below these thresholds and those supplying overseas markets who acquire a business to business or an EU 4th schedule service (this would include consultancy services) are also obliged to register for VAT.
- Domestic & International businesses must also register if their intra-community acquisitions of goods (that is goods bought from within the EU but outside Ireland) exceed or are likely to exceed €41,000 in a 12 month period.
- If your businesses is involved in a property transactions in the State where you are obliged to register.
- For “distance sales”; selling of goods into other EU states by phone, mail order or over the internet; the threshold is €35,000 per annum where you are a foreign supplier selling goods into Ireland.
A Irish business supplying products to consumers under distance selling arrangements i.e. via an online store or mail order shop are required to register for VAT once their turnover exceeds the threshold of € 75,000; this is irrespective of where their customers reside. Irish suppliers of distance sales products charge Irish VAT unless their sales to a particular EU state breach that EU states threshold. When this happens they have to also register in that EU state for those sales.
- If your business is involved in the supply of telecommunications, broadcasting and e-services to consumers you will need to be aware of new place of supply rules that came into effect on 01st January 2015. This change shifted the ‘place of supply’ to the place where the consumer resides.
Fortunately, there is a ‘one stop shop’ system (MOSS) available through Ireland’s ROS system to account for VAT on telecommunications, broadcasting and e-services to consumers in multiple EU jurisdictions.
- Finally, a business not established in the State is required to register for VAT in Ireland if they commence making taxable supplies of goods and/or services in the State; there is a zero threshold in place for non-established businesses.
DO Register for the cash basis of accounting as opposed to the invoice basis of accounting.
- This can significantly assist your cash flow. Cash Accounting is now possible where your turnover is no more than € 2m per annum. Also you can avail of cash accounting where your supplies are almost exclusively (at least 90%) made to customers who are not registered for VAT, or are not entitled to claim a full deduction of VAT.
DO Carefully structure your business if you are operating internationally.
- Be aware in advance if you may be creating a VAT establishment in another country. This may have VAT implications in the foreign country you are operating in. You also need to consider which of your international entities issues invoices to your clients and this will depend on market and financial considerations.
Do Know the profile of your customers/clients.
- Look at where they are located, are they individuals or businesses, are they registered for VAT themselves, etc.
- This is especially important if you are operating in the EU as this can influence whether you have to charge VAT or not in many cases! The rules governing this draw a distinct line between supplies made to business or consumers.
- In the domestic market this can make your supplies more expensive to competitors should you need to register for VAT and your supplies are to consumers only who cannot reclaim the VAT.
DO Retain your VAT invoices for at least 6 years after the accounting year has ended.
- The Revenue Commissioners can request these during this period. Without valid VAT invoices the basis for your claim will be weak.
DON’T Claim VAT back on invalid purchase invoices.
- A valid VAT invoice must be addressed to the taxable VAT registered entity so you cannot claim VAT back on invoices addressed to you personally if your business is an Irish Limited Company or Branch.
- We have also seen clients making VAT claims for expenses that are specifically excluded such as entertainment, hotel & personal outlays.
DON’T Expect to obtain a VAT number unless you can demonstrate some commercial substance in Ireland.
- Commercial substance can be such as ‘central management & control’ of the business, local based employees, customers, suppliers or business premises. Without all or some of these in place it will be difficult to justify that the business has a real activity in Ireland!
DON’T File your claim for repayment of VAT late if you are an International business.
- Those who carry out all their business outside of Ireland and are not Irish VAT registered have 6 months after the year end to lodge a claim for repayment of Irish VAT incurred here (so 30/06/2017 is the deadline for 31/12/2016).
DON’T Forget to charge Irish VAT on services related to property.
- The place of supply connected with Irish property is in Ireland so Irish VAT applies even if the client is foreign based.
DON’T File your VAT return late.
- This will result in late filing penalties and/or interest being applied.
DON’T Ignore the rules surrounding VIES & Intrastat law.
- These apply when you are doing business within the EU. Seek professional advice if you are unsure when you need to register for these additional VAT compliance issues.
These are just some of the issues that we have helped our clients with, whether we are just providing advice or processing returns for them.