Updated on April 20, 2022

What is the two-thirds rule?

Parts for washing machine repairs, for example, are frequently provided in exchange for the supply of a service.

This transaction is taxed for VAT purposes according to a set of guidelines.

Note

VAT is not included in any of the costs or calculations.

If the materials utilised to complete the work account for more than two-thirds of the overall cost,

The rate for the items is then applied to the transaction as a whole.
If the overall cost of the job is less than two-thirds of the total cost of the commodities used in the work:

The service’s rate is subsequently applied to the transaction as a whole.
The two-thirds rule refers to this situation.

Example

At the rate of the commodities, services are taxed.
Price of repair: €300, plus VAT, for a guitar.
I came up with this:
23 percent of the cost of materials (VAT exclusive)
€220
The total cost of labour, overhead, and profit is €80.
€220 is the price of the materials (VAT exclusive) exceeds two-thirds of the total cost (VAT exclusive)

In this case, the tax bill is €69 (€300 x 23%).

Exceptions to the two-thirds requirement can be found in the following services.

Vehicle and farm equipment repair and maintenance.
Principal contractors are responsible for VAT when they receive construction services from subcontractors.
Two parties working together to provide construction services.

Search VAT rates

Overview

It is possible to look for a certain product or service using the search box in the Value-Added Tax (VAT) rates database.

According to the VAT rates database, current practise is used to determine the tax treatment for VAT. Revisions in practise may necessitate revisions to the information.

Not to be taken as a law or as a substitute for doing your own research.

The Value-Added Tax Consolidation Act 2010 contains the rules for how products and services are assigned a VAT rating.

VAT rates database