Self accounting for Value-Added Tax (VAT)

Updated on April 16, 2022

Reverse charge regulations apply to intra-Community acquisition (ICA) transactions, in which the buyer is expected to pay for their own purchases. As a result, when purchasing items from other EU countries, the business customer is responsible for paying VAT.

An intra-Community supply has been made by the provider in another Member State (ICS).

To put it another way:

As an ICS, the supply is tax-free in the country of origin.

The buyer is responsible for paying the goods’ VAT.

It is the buyer’s responsibility to include VAT in their VAT filing. The VAT rate that is applicable is the rate that is in effect in their Member State.

In the same VAT return, if they are entitled to an input credit for VAT paid on the ICA, they can claim this back.

and

On any later sale of the items, the purchaser must account for VAT.

Example

In January 2016, an Irish businessman pays €5,000 to a German firm for supplies. Their taxable sales necessitated the purchase of these products. The zero-rate standards in Germany have been met, thus the German company does not impose VAT on the intra-community supply to Ireland.

Traders in Ireland must charge VAT at the usual rate, for example €1,150 (5,000 at 23 percent) at the standard rate. But the Irish trader is entitled to claim an input credit of €1,150, as the products were acquired for taxable supplies, providing that the transaction is deductible for VAT reasons.

There have been two taxable events that have taken place:

First, the zero-rate intra-Community supply provided by the German supplier.

Secondly, the buyer is responsible for making the appropriate intra-community purchase in Ireland.

The VAT 3 return of an Irish trader for January/February 2016.

Liability under the VAT Act

The total amount that must be paid out of pocket

A T1 of €1,150 is required.

T2: €1,150 (purchase tax)

a third of a trifecta (VAT payable)

Nil

Tax-reimbursable T4 is nil.

It’s E1 time! (value of goods sent to other EU countries)

Nil

EUR 5,000 in E2 (exports from EU countries)

Customers in Ireland are charged VAT at 23 percent when they purchase items from an Irish dealer, which is then paid to Revenue in the normal course of business.

Overview

When items are sent or transported between companies in different EU member states, this is known as intra-community supply and acquisition (EU). Two transactions are assessed to have taken place for VAT purposes:

acquisition within the community (ICA) and supply within the community (ICS).
The ICA of commodities is addressed in this section. An ICA is a transaction in which a company in one EU member state buys movable goods from a company in another EU member state. As if he or she had made the supply, the buyer is responsible for the VAT in these transactions.

This paragraph explains:

The definition of VAT self-accounting
Which ICA information must be sent to Revenue when you are forced to register for VAT because of your ICAs when VAT on branch-to-branch transfers must be accounted for
This is what occurs when you buy a new mode of transportation from another EU member state, as reported by VIES and Intrastat.

What information on your ICAs must you submit to Revenue?

Value-Added Tax (VAT) 3 returns must include information on all intra-Community acquisitions (ICAs). In the T1 (sales) box, you must charge VAT at the appropriate Irish VAT rate.

If the purchase is deductible for VAT reasons, you can recover the VAT in the T2 (purchases) box.

The E2 (ICAs) box must include the value of the goods purchased.

Your annual Return of Trading Details (RTD) form must now include information on your ICAs.

When is VAT due on an ICA?

In the next year, VAT is owed on:

On the 15th day of the month after the month in which the purchase was made, if an invoice was not issued.
Due date for VAT payments is included in the VAT return for the taxable period that corresponds to this date.

The price of the goods is used as the basis for calculating VAT. For foreign-currency invoices, the rate of exchange in effect at the time the VAT is payable should be utilised.

When are you required to register solely because of intra-Community acquisitions (ICAs)?

All intra-Community acquisitions (ICAs) are subject to self-accounting by VAT-registered enterprises, and there is no threshold for this.

The exception to this rule is, however,

VAT is not applicable to the supplies of firms that are completely exempt from it or other entities.
ICAs of goods with a value of more than €41,000 must be registered if the value is expected to exceed €41,000 for a continuous period of 12 months.

These include, but are not limited to, the following enterprises and organisations:

Financial institutions and non-profit organisations that provide health care are known as “insurers.”
VAT must be paid on ICAs by such organisations at the relevant rate. The VAT paid on ICAs, as well as all other VAT, cannot be deducted by these organisations.

Example
ICA-registered insurance firm purchases €5,000 worth of goods from a French company in January 2020 for its own use, which is exempt from VAT.

VAT of €1,150 (5,000 @23 percent) is included in the insurance company’s VAT Return, which must be filed annually. Insurers are not entitled to take credit for their work. A settlement of 1,150 Euros is required from Revenue by the insurance firm.

January and February of next year’s VAT 3 returns are due.
T1 (VAT on sales) €1,150 T2 (VAT on purchases) (VAT on purchases)
No tax payable in T3 and €1,150 in T4 (VAT repayable)
Non E1 (value of goods sent to other EU countries)
E2 0 (value of goods received from other EU countries)
€5,000

What are VIES and Intrastat?

VAT-registered traders who purchase products or make intra-Community supplies must also file extra reports under the following regimes.

VIES Intrastat system for exchanging VAT data.

VAT Information Exchange System (VIES)

Checks can be undertaken in each Member State on the legitimacy of zero-rating claims using the VIES process. With its support, Member States can keep tabs on the flow of zero-rated goods between their borders.

To verify the VAT registration numbers of their customers in different EU Member States, VIES is available to businesses. Traders can use this to verify the accuracy of the VAT numbers they’ve been given. Only intra-EU trade is covered under the VIES system.

In order for VAT-registered businesses to report their EU sales, they must file periodic returns. Detailed VIES reporting instructions are provided in additional documentation.

Intrastat

When it comes to tracking the movement of products between EU countries, Intrastat is used. It is important to note that intra-EU trade data are not based on the ownership of the commodities themselves. Their actual activity is the only thing that is relevant here.

Detailed Intrastat information can be found in the Additional Guidance section.

Intra-Community acquisitions (ICAs) of alcohol products

Value-Added Tax (VAT) is paid at the same time as excise tax is paid in the State in the event of intra-Community purchases of alcohol. When calculating VAT, excise duty must be taken into account, and this amount is added to the invoiced price.

What is the duty suspension arrangement?

Because of a duty suspension arrangement, VAT does not apply to the sale of alcohol goods, independent of their source (imports, EU ICAs or home-produced), in most cases.

As long as the supply of alcohol products is made when the duty is suspended, it is not a supply for VAT purposes. Excise duty and VAT are due at the moment of removal from duty suspension. Disregard any previous supply, whether EU ICA or imported.

It will not be charged on the VAT invoice produced at the time of supply if the ultimate supply is exempt from the tax. Instead, the owner will be responsible for paying it along with the excise duty when the products are removed from duty suspension.

Alcohol items supplied while subject to a duty suspension agreement would fall under this category:

Providers shouldn’t be required to collect sales tax.
Invoices for the supply should not include VAT information.
ICAs in alcoholic beverages get more in-depth treatment recommendations.

Acquisitions of new means of transport from another Member State

If you bring a new vehicle into Ireland from another EU member state, the Irish Value-Added Tax will be applied (VAT). New modes of transportation include automobiles, boats, and planes. The following table provides the required information.

For VAT reasons, a new mode of transportation.
Transport ‘New’ Vehicle Specification
More than 48cc or 7.2kw of power
At least six months of age and/or having driven 6,000 kilometres
a ship in the seas
greater than or equal to 7.5 metres in length, less than three months old, or less than one hundred hours of sailing
Aircraft
Takeoff weight of more than 1,550 kilogrammes
less than three months old, or less than forty hours of flight time

When does VAT become payable on new means of transport?

New motor vehicles

The Vehicle Registration Tax (VRT) and Value Added Tax (VAT) on the purchase of a new motor vehicle are generally paid by:

those people who are not entitled to VAT refunds.
There is no grace period if no VRT applies, in which case VAT must be paid no later than 15th of the next month.

New vessels and aircraft

The local Customs office collects the VAT on the purchase of a new vessel or aircraft:

The term “individuals” is used here.
VAT cannot be reclaimed by anyone else.
Three days after the date of arrival in the state, the VAT is due.

Accountable Persons

Those who are eligible to claim VAT on the purchase of a new vehicle must submit a VAT return in order to do so.