Updated on March 22, 2022
VAT (Value Added Tax) is a tax levied on the sale of goods and services inside the European Union’s member states. In all circumstances, the tax is paid by the final consumer of the product or service. Each partner in the supply chain (maker, wholesaler, and retailer) collects VAT.
They charge their customers VAT and include it in their VAT return to Revenue. They can reclaim VAT that has been charged to them by their suppliers by returning the VAT collected.
The state’s jurisdiction includes its territorial sea for VAT purposes. The state’s territorial sea stretches out to a distance of twelve nautical miles.
This section clarifies:
who are liable to pay taxes and who are liable to be held accountable
exemption from paying VAT
charge in the opposite direction (self-accounting)
actions that qualify
VAT and tax evasion.
Who are taxable and accountable persons?
Who is a taxable person?
A taxable person is someone who runs a business on their own in the European Union (EU) or elsewhere. It includes VAT-exempt individuals as well as flat-rate (unregistered) farmers.
Who is the one who is responsible?
A taxable person (for example, an individual, a partnership, or a corporation) who:
provides taxable products or services in the state and is VAT registered or needs to be VAT registered.
As a result, they must charge VAT in the state.
VAT exempt status
In general, a taxable person exclusively provides exempt services (goods or services).
A taxable person is not required to register for VAT in the case of such exempt activities.
A trader of exempt products, on the other hand, may be compelled to register and account for VAT on intra-Community purchases and services from outside the EU.
A taxable person who provides taxable goods or services may also be obliged to register for VAT.
VAT registration, on the other hand, is related to your taxable supplies.
As a result, if you engage in both exempt and taxable activities, you can only claim VAT on the taxable ones.
See our VAT section on property and construction for particular provisions relating to property.
What is reverse charge (self-accounting)?
Value-Added Tax is normally charged and accounted for by the goods or service’s supplier (VAT). In some circumstances, however, the beneficiary is obligated to answer for the VAT due rather than the provider.
This is true in the following situations:
intra-Community acquisition of goods from another Member State receipt of taxable services from abroad cultural, artistic, or entertainment services from persons not established in the State repair, valuation, or contract work performed on movable goods in another State in certain circumstances goods installed or assembled for certain designated persons in the State by a non-established supplier
certain categories of persons in the State receive gas or electricity through the natural gas distribution system from a person not established in the State receipt of greenhouse gas emission allowances from another taxable person established in the State or abroad by certain categories of persons in the State See the supplemental guidelines for more information.
a taxable person engaged in a business in the State that consists of or includes dealing in scrap metal, or a supply of building work in the State between two linked individuals a taxable person who engages in scrap metal dealing as part of his or her business in the state a taxable person who engages in scrap metal dealing as part of his or her business in the state a taxable person who engages in scrap metal dealing as part of his or her business in the state a taxable person who owns and operates a business in the
What are qualifying activities?
VAT on costs incurred in making taxable supplies of goods or services can be reclaimed.
Furthermore, you can reclaim VAT on costs made in connection with certain enumerated activities, even if they are not taxable. These are referred to as ‘qualifying activities.’
These are the activities that qualify you:
Supplies of goods that are regarded to have taken place in another Member State by virtue of distance sales laws are transported outside the State of passengers and their accompanying baggage. This is only possible if the supplier is VAT-registered in the other Member State.
Certain financial and insurance services supplied outside the EU or directly in connection with the export of goods to a place outside the EU services consisting of the issue of new stocks, new shares, new debentures, and other new securities made to raise capital for an accountable person’s taxable supplies supplies of goods or services outside the State that would be taxable supplies if made in the State services consisting of the issue of new stocks, new shares, new debentures, and other new securities made to raise capital for an accountable person’
Being involved in a series of transactions linked to a Value Added Tax (VAT) fraud has repercussions. This is true even if the transactions in which you are participating are not illegal in and of themselves.
Where penalties are warranted, Revenue will impose them, and you may:
You will lose your right to reclaim VAT.
If the underlying transactions are linked to fraud, you will be responsible for Irish VAT on previously zero-rated intra-Community deliveries.
More specific information on how to safeguard your business from VAT theft can be found in the additional guidance.