Packing, shipping and postage

Updated on April 18, 2022

The packages in which the goods are packaged for sale do not have to be charged separately for the commodities being supplied. Value-added tax (VAT) is charged at the rate that is applicable to the goods in certain situations..

When commodities and containers are sold separately, the transaction is considered to be a sale of both items and containers separately. The proper rate is charged for each separate sale.

What if the containers are returnable?

There may be a separate price on an invoice for containers that can be returned, in the form of a deposit. At the time of delivery, these containers are considered the property of the supplier and are exempt from VAT.

However, the value of containers that are not returned to the provider is subject to VAT at the relevant rate. When the containers account is tallied, you must account for this VAT. The provider assesses a fee for containers that are not returned.

Postage

Postage is not subject to VAT if it is invoiced separately and paid in full to An Post.

Example
An additional €5 is charged by a trader for shipping an order, and An Post receives the full payment. The five euros may be considered exempt from taxation.

The supplier pays An Post a fee for postage that is less than the amount An Post receives from the source. In this situation, the customer’s postal fee is considered part of the entire cost of the product or service. Depending on the appropriate VAT rate, this may or may not apply.

Those that distribute magazines get a discount on their postage from An Post because of their volume. Several variables come into play in this circumstance, and An Post’s discount is not entirely passed on to the buyer.

When is VAT due?

If postage is charged separately and paid entirely to An Post, then these charges are not subject to VAT.

Example
A trader charges an extra €5 for posting an order and this full amount for postage is paid over to An Post. The €5 may be treated as exempt.

A charge is made for postage that is of a lesser amount paid over by the supplier to An Post. In this case the postal charge made to the customer is regarded as part of the total price of the goods or service supplied. This is subject to the VAT rate applicable to the goods or service in question.

A business providing a distribution service for magazines receives a volume discount for the postage from An Post. This situation depends on a number of factors, and the discount from An Post is not passed on in full to the customer.

How do you pay VAT?

ROS and myAccount let you pay Value-Added Tax (VAT) in a number of different ways.

Information about electronic VAT returns and ROS payments can be found in Additional Guidance.

Accounting for VAT on moneys received

Overview

Value-Added Tax (VAT) registered individuals may choose to account for VAT on the basis of moneys received in this section.

It explains how these people can apply to operate this programme and the rules of the programme.

Please consult the VAT guidance on special schemes for retailers, which deals with the calculation of sales by retailers for each VAT rate, before reading this guidance.

Who may opt for the moneys received basis?

If you meet one of the following criteria, you may submit an application to account for VAT in this manner:

Those whose annual turnover does not exceed €2,000,000 or is not expected to exceed €2,000,000 over the course of a year.
VAT-registered person that supplies nearly entirely (at least 90%) to non-registered clients or clients who do not have the right to claim the full VAT deductions.
Customers who buy goods and services from businesses that primarily serve the general public would fall under this second requirement in practise.

What is the moneys received basis?

VAT must be reported by a business when one of the following situations occurs:

Supply or an invoice is sent to a customer depending on the situation.
Under the moneys received accounting method, VAT must be accounted for when a trader receives payment.

Invoices are still required if you are using the moneys received basis for VAT.

When can you not use the moneys received basis?

There are some transactions for which the money received basis cannot be utilised to calculate VAT:

Construction services provided by a subcontractor to a major contractor must always be accounted for on the invoice basis in property transactions involving the formation of long leases prior to 01/07/2008.

How do you apply for the moneys received basis?

In the appropriate box on the registration form, you should specify that you desire to use the moneys received basis if you are registering for the first time for Value-Added Tax (VAT). In order to put the money you’ve been given to good use, you must comply with the requirements laid out in this section.

Changing from the moneys received basis to VAT registration requires a written application to your local Revenue office.

The following information should be included in your request to put the funds you’ve received to good use:

a person’s full name and postal address
If applicable, information about the nature of your company activity, such as your VAT registration number
Any of the following periods has the shortest percentage of taxable supply turnover connected to supplies to unregistered persons:
the 12-month period that began on the last day of the tax period preceding the application or that began on the first day of company operations and ended on the last day of the tax period preceding the application.
estimate of taxable sales to unregistered people for the 12 months prior to when application is submitted if annual turnover is less than €2,000,000 in that period.
VAT on the moneys received basis can be accounted for from the beginning of the period in which it is granted, or from a later date, if so provided in the authorization.

Changing to and from the moneys received basis

Invoice or sales basis to the moneys received basis

Value-Added Tax (VAT) is due on moneys received from the date that Revenue gives you permission to convert from the invoice basis to the moneys received basis.

The money received does not include any payments for products and services for which VAT has already been paid.

Please note that unless we give you the go-ahead, you cannot switch from an invoice basis to a receipts one without our permission.

Moneys received basis to an invoice or sales basis

An adjustment must be made in the time of cessation, to account for the VAT payable on outstanding debts at the date of termination of the person’s authorization or accountability.

According to this, the adjustment is dependent on how much outstanding debtors owe the accountable person for taxable supply at the time of discontinuation. The following formula is used to determine the applicable VAT rate for the outstanding balances:

What is A / C?

for all products and services supplied during the authorised period, A – total sum owed to the person (outstanding debtors).

In the 12 months preceding the cessation date or the authorised term, whichever is shorter, B is the taxable amount for taxable supply at each rate of tax.

To calculate C, you must know the taxable amount of all taxable supply made in the preceding 12 months or, for shorter periods, within the permissible time.

A different apportionment formula may be acceptable between the various tax rates in your area.

To determine the tax owed for the period in which the cessation of monies received basis occurs, the apportioned amount at each rate must be viewed as a tax inclusive amount.

In the event of the death of the person responsible for the cessation of the obligation, no adjustment is made to the liability.

VAT rates on the moneys received basis

Value-Added Tax (VAT) is due when goods or services are provided, at the rate in effect at the time.

Changing VAT rates necessitates a change in VAT rates to be applied when goods or services are actually provided, not when a payment is received (if this is later).

What sums are included in the moneys received basis?

A VAT-registered supplier can receive the following types of funds:

received by another person on the supplier’s behalf and deducted as Professional Services Withholding Tax by an accountable person, or as Relevant Contract Tax by a principal contractor or subcontractor paid to Revenue by a third party to the supplier’s account in accordance with Revenue’s power of attachment.
Setting off a credit against a liability in a commercial transaction is also considered to be a receipt for money by a VAT-registered individual. Received dates are used as offset dates.

Care must be taken to ensure that any money received through an agent, such as fees, expenditures, and so on, is counted as money received by the agent.

The receipt date is taken to be the date of the offset.

Professional Services Withholding Tax (PSWT)

As a result of the PSWT withheld from professional service payments for VAT purposes, the provider is considered to have received a portion of the payment.

Example
VAT is included in a lawyer’s gross fee of €1,230 for professional services.

In this case, PSWT is liable for 20% of €1,000 VAT-exempt, with €200 withheld for Income Tax.

If the solicitor receives €1,230, he or she is required to account for the additional €230 in VAT.

Relevant Contract Tax (RCT)

Using the reverse charge method, the principal contractor is responsible for accounting for VAT on construction services provided by a subcontractor to the principal.

In other words,

In this case, the subcontractor will be paid exclusively on a VAT-exclusive basis, and the principal contractor should account for VAT on the total consideration invoiced by the subcontractor, including RCT withheld, RCT should be assessed on the VAT-exclusive consideration.
Construction services performed by two associated parties are likewise subject to the reverse charge.

If the transaction involves State entities, please refer to further State procurement instructions.

Moneys received basis eligibility and cancellation

If your circumstances change to the point where you are no longer qualified to account for VAT on the basis of money received, you should notify Revenue.

If, over the course of four consecutive months, your total revenue from taxable supply to unregistered persons falls below 90% of your total revenue, you must notify Revenue of the change. Do this by the end of that month, detailing how much of your supplies were given to unregistered customers during that time period.

The authorisation may be extended if there is only a slight or transient shift in the proportion of such supplies.

If your annual revenue exceeds €2 million in any consecutive 12-month period, you will no longer be eligible for the programme and should notify Revenue of the change. In order to determine this probability, it is necessary to take into account your turnover over a period of four months. By the end of the next month, you must notify Revenue of the change in circumstances.

Failure to notify your Revenue office in each of the above circumstances will deem your authorization to be cancelled from the start of the VAT period within which the notification should have been made.

In the event that an authorisation is revoked, it will take effect either:

the beginning of the VAT accounting period when you are notified by your Revenue office of such cancellation or, if stated in the notice, the beginning of a later VAT accounting period.