Tax and Duty Manual VAT Reverse charge – Scrap Metal

Updated on April 12, 2022

Reverse charge on supplies of Scrap Metal

This document should be read in conjunction with Section 16 of the VAT Consolidation Act 2010 (VATCA 2010) and paragraphs (1) to (3) of Annex VI of the VAT Directive.

Tax and Duty Manual VAT Reverse charge – Scrap Metal

Table of Contents

Table of Contents
1. Key definitions………………………………………………………………………………………….3
1.1 What is scrap metal? ……………………………………………………………………………..3
1.2 What does dealing in scrap metal mean? …………………………………………………3
1.3 What does recovery mean?…………………………………………………………………….3
2. Who is impacted?……………………………………………………………………………………..3
3. How the reverse charge works……………………………………………………………………4
4. Deductibility …………………………………………………………………………………………….5
5. Supplies of scrap metal from persons not registered for VAT ………………………..5
6. Margin Scheme Goods………………………………………………………………………………6
7. Zero-rating scheme for qualifying businesses……………………………………………….6

Tax and Duty Manual VAT Reverse charge – Scrap Metal

Introduction

The reverse charge method for the supply of scrap metal between taxable persons conducting business in the State is outlined in this guideline.

1. Key definitions

1.1 What is scrap metal?

Scrap metal is defined as scrapped metal and metal waste from metal processing, metal derived from vehicles, metal derived from construction and demolition waste, machine parts, and metal items that are no longer usable in their original form due to breaking, obsolescence, shearing, wear, or the like.
ferrous and non-ferrous waste, scrap, and used materials, including semi-finished products resulting from the processing, manufacturing, or melting down of ferrous and non-ferrous metals and alloys, ferrous and non-ferrous semi-processed products and certain associated processing services, and residues and other recyclable materials containing ferrous and non-ferrous metals, alloys, slag, ash, scale, and industrial residues containing metals and alloys

1.2 What does dealing in scrap metal mean?

The acquisition, sale, resale, or recovery of scrap metal is referred to as scrap metal dealing.

1.3 What does recovery mean?

In the context of scrap metal, recovery refers to any activity involving the reclamation, recycling, or re-use of scrap metal in whole or in part, as well as any activities linked to such reclamation, recycling, or re-use.

2. Who is impacted?

The reverse charge on scrap metal supplies will affect: taxable persons carrying on a business in the State that consists of, or includes, dealing in scrap metal and who receive scrap metal supplies from other taxable persons in the State, taxable persons carrying on a business in the State who supply scrap metal to taxable persons in the State, and persons whose business activity includes purchases or sales of scrap metal products.

Tax and Duty Manual VAT Reverse charge – Scrap Metal

3. How the reverse charge works

Under the reverse charge system, the burden of accounting for and paying VAT is moved from the person who makes the supply to the one who receives it.

The provider sends the recipient a document (reverse charge invoice).

Contains all of the information required on a VAT invoice except the VAT rate.

in addition to the VAT amount It should also state that the gift is been received by the recipient.

“VAT on this supply must be paid” and “VAT on this supply must be paid” are two phrases that should be included.

“The recipient has been identified.”

The recipient will receive the items if the supplier and the recipient have agreed ahead of time.

If all agreed-upon protocols are followed, a reverse charge invoice may be issued.

The location where the invoice’s legitimacy is accepted by the supplier.

The VAT is not paid to the supplier; instead, it is accounted for in the recipient’s books.

the VAT return for the eligible period in VAT on Sales (T1).

A VAT on Purchases (T2) simultaneous input credit can be claimed by the recipient.

whether he or she has acceptable documents and would be eligible for the VAT

a credit for input if the VAT was charged by the supplier

Example 1

€1,000 is exchanged for scrap metal from Business A. (excl. VAT).
Both companies are registered for VAT.
Business A sends an invoice to its clients (or, if agreed, Business B may raise the invoice),

When the VAT is paid by the recipient (Business B), it shows that they are responsible.

The invoice does not provide a breakdown of the applicable VAT.

Business B calculates the VAT (1,000 x 23% = €230) and accounts for it in the VAT register.

VAT on sales will be recouped for that time period (T1).

In the same way that Business A can claim input credit, subject to deductibility requirements, Business B can claim

recoup the VAT you paid (T2).

For €1,300, Business B sells scrap metal to VAT-registered Business C.

VAT not included.

invoices are issued by businesses B and C, however they don’t include VAT information.

rate and VAT amount, but with a note that VAT is the responsibility of Business C.

VAT is calculated by Business C (1,300 € x 23 percent = €299) and is recorded in

In T1 you will see the VAT return for the period

Business C may be able to claim input credit for the VAT it paid if certain conditions are followed.

T2 yielded the same result.

Example 2

For profit, Jeweller D buys and sells second-hand jewellery from private individuals. Both transactions are free of the risk of a reverse charge. The normal VAT rules will be in place, as they always are.

Tax and Duty Manual VAT Reverse charge – Scrap Metal

Example 3

A VAT-registered business E pays €500 to a jeweller D to buy broken jewellery from a private individual and sell it on as junk (excl. VAT).
There is an invoice from Jeweller D that reveals that Business E (the recipient) is responsible for the value added tax (VAT).
The invoice does not provide a breakdown of the applicable VAT.
Accounts for €115 of VAT on Sales in the VAT return for the period (500 x 23 percent = €115) (T1).
The same VAT return (T2) can be used to claim input credit for Business E, subject to deductibility requirements.

4. Deductibility

To claim a simultaneous input credit in the event that the recipient of scrap metal is responsible for VAT due to reverse charge rules, the recipient must meet two conditions: • They must be entitled to deductibility under normal VAT rules, and • They must have a valid reverse charge invoice, either drawn up by their supplier or (by agreement) by the recipient.

5. Supplies of scrap metal from persons not registered for
VAT

All scrap metal supplies received by a recipient from non-VAT registered sources must be meticulously documented by the dealer. The dealer is responsible for providing the supplier with a document that includes the following information and keeping a copy of it for future reference.
In what month and year did the document come out?
A sequential number formed from one or more series serves as the document’s unique identifier.
The name and address of the person who supplied the goods must be included in the paperwork.
The recipient’s full name and address, if you know it.
Commodities, including their quality and quantity, as well as their availability
When the supply was manufactured.
Prices that have not already been discounted or reduced as part of the selling price.
The sum of money awarded as a reward in this instance.
The provider has agreed to accept the authenticity of the document based on agreed-upon procedures (e.g. signature of both parties).

Tax and Duty Manual VAT Reverse charge – Scrap Met

It is mandatory for a dealer whose annual sales of taxable items above the VAT Registration threshold to register for the tax. Traders dealing in scrap metal must notify the Revenue Commissioners if they obtain shipments of scrap metal whose worth exceeds the VAT Registration Threshold in any 12-month period from an unregistered trader.

6. Margin Scheme Goods

In the Margin plan – Second-hand Goods, scrap metal is not eligible for inclusion.

7. Zero-rating scheme for qualifying businesses

To obtain scrap metal at the zero-rate, a taxable person must qualify for the zero-rating plan for businesses.
The VAT on scrap metal supply from other taxable persons in the State must be accounted for by those who qualify under the zero-rating scheme.