Updated on June 5, 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 territorial sea of the State extends to a limit of twelve nautical miles.
This section explains:
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 an accountable person?
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.
Exemption from VAT
In most cases, a taxable person provides only operations that are free from tax (goods or services).
VAT registration is not required for taxable persons engaged in such exempt activities.
Intra-community purchases and services from outside the European Union can need a trader to register and account for VAT.
VAT registration may also be necessary for any taxable person who provides taxable goods or services.
On the other hand, VAT registration only applies to taxable products.
This means that you can only claim VAT back on the taxable parts of your business if you do both tax-exempt and tax-exempt operations.
See our VAT section on property and building for additional information.
What is reverse charge (self-accounting)?
In most cases, the person that provides the products or services is the one who collects and accounts for the VAT. However, in other cases, the beneficiary, rather than the supplier, is obligated to account for the VAT that has been incurred.
Those who are affected by this include:
repair, valuation, or contract work performed on movable goods in another State in certain circumstances goods where they are installed or assembled for specific designated persons in the State by a third-party contractor for intra-Community purchases from another Member State receiving services from abroad that are taxable where received receiving cultural, artistic, or entertainment services from third-party contractors not established in the State
receiving natural gas or electricity from a person not established in the state through the natural gas or electricity distribution system by certain categories of people in the state receiving permits for greenhouse gas emissions from another taxable entity established in the state or abroad For further in-depth information, please refer to the following links.
vesting order to NAMA a taxable person who is engaged in the business of trading in scrap metal or the delivery of building work in the state between two linked persons
What are qualifying activities?
It is possible to claim back VAT on expenses related to the sale of goods or services.
On top of that, some actions that aren’t taxable can be reclaimed for VAT, even though those activities aren’t taxable. “Qualifying activities” are what you’d call these kinds of activities.
These are the actions that qualify:
inbound and outbound transportation of persons and their belongings
Supplies of commodities that are considered to have taken place in another EU member state due to distance selling regulations. As long as the supplier is VAT registered in the other Member State, this is possible.
Certain financial and insurance services provided outside of the EU are directly related to the export of commodities beyond the EU.
issuing additional stock, shares, bonds, and other financial instruments to raise funds for the taxable supply of an accountable party
Outside-of-the-state deliveries of goods or services that would be taxable if made in the state.
Participating in a series of transactions linked to a Value Added Tax (VAT) fraud has repercussions. Even if the transactions you’re engaging in are legal, you’re still subject to this rule.
Revenue will impose penalties when necessary, and you have the following options:
lose the ability to claim back VAT
where deception is involved, you may be liable for Irish VAT on previously zero-rated intra-Community supplies.
There is more specific advice on how to safeguard your company from VAT fraud in the further guidance.