Valued Added Tax (VAT) is a tax charged by Irish and other European businesses on the sale of goods and services. VAT is included in the price of most everyday items already so as a consumer you don’t usually see what percentage of VAT you’re paying. For business expenses, such as stock, advertising & professional services, you will see it broken down on the VAT invoice that you receive from a VAT registered supplier.
On becoming VAT registered in Ireland, you will be obligated to file a VAT return on a bi-monthly basis with the revenue detailing your VAT on sales for the relevant period, your deductible VAT on purchases for the same period and details of any intra EU sales or purchases. You will be obligated to file the return and pay any net VAT liability owing by the 19th day of the month following the end of the relevant 2-month period. On an annual basis, you will be obligated to file a VAT RTD return providing further information relating to your VAT trading activities carried on during the relevant trading period. All of this can create a high administrative and reporting burden particularly for small businesses – this might translate into higher accountancy fees if you do not have the time to process the VAT reports & returns yourself. Therefore it’s important to know when you need to register, and when it might be appropriate to make the decision to voluntarily register.
If you are a VAT registered sole trader or limited company in Ireland, you are required to charge VAT on your products or services to your customers. The VAT rules that apply to you are dependent on the type of product or service that you offer, how you offer it (i.e. online or bricks & mortar) and also on the type (i.e. business or consumer) & location (i.e. In Ireland, In the EU, or outside the EU) of the customer that you serve. Depending on the type of business you have, VAT rules can be notoriously complex, and it is generally advisable to speak with your accountant (or hire an accountant) before making any VAT decisions – failure to comply with VAT rules is very easy, and it can often be a very expensive learning curve for business owners if not done right at the outset. See our guide to Form 11 Tax Return as well.
Do I need to register for VAT?
You don’t always have to register for VAT straight away as a new business. There are some situations however where your business will be obliged to register.
When you will be required to register
- If in a 12 month trading period (not a calendar year) you go above €37,500 for the sale of services or €75,000 for the sale of goods
- If you receive goods from other EU member states above €41,000
- If you are outside Ireland and make mail-order or phone or online sales (“distance sales”) into Ireland above €35,000
- If your business receives services from outside Ireland at any level and these services are used in Ireland your business may need to register for VAT
- 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.
Further, you may have obligations to register for VAT in other EU states if you sell into those states and you exceed certain thresholds dependent on location. This is not an exhaustive list, and again it is generally advisable to speak with your accountant to determine if you should or need to register for VAT in Ireland.
Can I voluntarily register for VAT?
How do I register for VAT in Ireland?
To register for VAT in Ireland you need to register with the Irish Revenue. You can submit a VAT registration application via Revenue Online Service (ROS). Alternatively, your tax agent or small company accountant can do this for you on your behalf. Revenue have become stricter recently with regard to VAT registration to avoid rogue traders and to guard against abuse of the system. Generally, in order to register you will need to show proof of trading in Ireland.
For example, you will need to show (amongst other things)
- Your business has trading activity in Ireland
- Invoices from Irish suppliers and to customers
- The owner/Director of the business lives in Ireland
- You have a physical office in Ireland
Why would my application be rejected?
- You haven’t hired employees in Ireland
- You don’t trade with suppliers in Ireland
- Your Director isn’t based in Ireland
- You have no Irish customers
How long is the process of getting a VAT number?
Once your application has been submitted if can take up to 28 days. This is if there are no requests for further information from Revenue, and on the basis it is not a peak time for Revenue (e.g. end of October / Middle November and end of December / January each year).
How often do I need to submit a VAT return?
Generally, you are required to submit a VAT return bi-monthly, by the 19th of the month for that two month period or by the 23rd if you’re using Revenue’s online service (ROS). The two month period starts on the first of January every year.
It is important to ensure you have adequate sole trader bookkeeping in place to ensure you have the reporting capability to produce information and reports in a timely manner so as to meet your VAT return deadlines. Depending on the number of transactions in your business, you might look to get set up with Xero cloud accounting software (whether cloud-based e.g. Big Red Cloud, Quickbooks, Surf Accounts, or desktop) to help you meet your reporting needs. For businesses with a lower volume of transactions, an excel spreadsheet is probably good enough, but it is important to keep it up to date throughout the year. If you do not file a VAT return or if you are late in filing a VAT return, you can face fines and penalties for missed income tax deadlines – late filings can also impact your tax clearance certificate, which will then have a knock-on effect on some of your suppliers who might refuse to work with you until you have a valid tax certificate in place. It’s important to keep in mind that meeting taxation deadlines will be your must-do.
What do I need to show on my VAT invoices to customers?
- Date of issue
- A unique sequential number
- The suppliers full name, address and registration number
- The customer’s full name and address
- In the case of a reverse charge, the customer’s VAT number and a notion that a “reverse charge applies”. (This does not apply to construction servives subject to Relevant Contracts Tax)
- In the case of a intra-Community supply of goods, the customer’s VAT number and a notion that this is a “intra-Community supply of goods”
- The quantity and nature of the goods supplied
- The extent and nature of the services rendered
- The VAT exclusive unit price
- The payment recieved net of VAT
- The discounts or price reductions
- The breakdown by the rate of VAT
- The total VAT payable in respect of the supply
- The date on which the goods or services were supplied
- Where an early payment is made prior to the completion of the supply, the date on which the payment on account was made. This only applies if the date differs from the date of issue of the invoice
- The full name and address of the Member State’s VAT number representitive. This is the case where a tax representitive is liable to pay the VAT in another Member State.