What is VAT?

Updated on June 3, 2022

Overview

VAT is a tax levied by EU member states on the sale of goods and services within their borders. Taxes are always paid by the eventual purchaser of a product or service. Manufacturers, wholesalers and retailers all collect VAT on behalf of the government.

Upon receipt of VAT from their consumer, they are required to report that amount to Revenue. When they return the VAT they have collected, they can reclaim, if appropriate, the VAT that their suppliers have charged them.

For tax purposes, the State’s territorial sea is considered part of the State’s territory. Twelve nautical miles is the maximum extent of the state’s territorial sea.

Following is an explanation of what is explained in the preceding paragraph:

who owes taxes and must answer for their actions

the absence of a VAT

reversing the polarity of an electric (self-accounting)

activities that meet the requirements of certification

VAT and tax evasion

Who are taxable and accountable persons?

Who is a taxable person?

The term “taxable person” refers to someone who runs a business on their own in the European Union (EU) or elsewhere and is therefore subject to taxation. Flat-rate (unregistered) farmers and those who are exempt from Value-Added Tax (VAT) are included in this category.

Who is a responsible party?
To be held accountable, one must be a tax-paying individual, partnership, or corporation who:

is obliged to register for VAT if they provide taxable products or services in the state.
As a result, they must collect and remit sales tax to the state.

Exemption from VAT

In most cases, a taxable person provides only operations that are free from tax (goods or services).

A taxable person is not required to register for VAT if they are engaged in such exempt activities.

If a trader of exempt supplies purchases goods or services from within the EU or overseas, they may be compelled to register and account for VAT.

VAT registration may also be necessary for any taxable person who provides taxable goods or services.

VAT registration, on the other hand, has to do with the taxable supplies you make.

To be eligible for a VAT refund, you must be engaged in both exempt and taxable activity.

See our VAT section on property and building for additional information.

What is reverse charge (self-accounting)?

Value-Added Tax (VAT) is generally charged and accounted for by the seller of the goods or services. However, in certain circumstances the recipient rather than the supplier, is obliged to account for the VAT due.

This applies to:

the intra-Community purchasing of commodities from another Member State

the receiving of services from abroad that are taxable where received

the receipt from abroad of cultural, artistic or entertainment services from persons not established in the State

repair, appraisal or contract work carried out on moveable property in another State in certain situations

items where they are installed or assembled for certain designated persons in the State by a supplier who is not located in the State

intra-Community transport and auxiliary services that are delivered by a non-established person to an accountable person in the State

construction services that are delivered to a major contractor by a sub-contractor, whether or whether the sub-contractor is based in the State

the receiving of gas through the natural gas distribution system, or electricity, from a person not established in the State by specified categories of persons in the State

the receipt of greenhouse gas emission allowances from another taxable person established in the State or overseas. See further guidance for more detailed information

the ownership of items that are transferred by virtue of a vesting order to NAMA

a taxable person engaged on a business in the State which consists or involves dealing in scrap metal

a supply of construction work in the State between two related 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 actions are what they sound like.

These are the actions that qualify:

transportation of people and their baggage supply of products that are regarded to have taken place in another Member State by virtue of the distance sales regulations. As long as the supplier is VAT registered in the other Member State, this is possible.
financial and insurance services provided outside the EU or directly related to the export of goods to a place outside the EU services consisting of the issue new stocks, shares, debentures and other securities made to raise capital for an accountable person’s taxable supplies

VAT fraud

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
VAT will be imposed on previously zero-rated intra-Community supply if the transactions involved in the fraud are linked to it.
In the future guide, you’ll find more specifics on how to guard your company from VAT fraud.