What is VAT?

Updated on May 16, 2022

Overview

EU Member States collect Value-Added Tax (VAT) on sales of goods and services inside their borders. In all situations, the final purchaser of the product or service is ultimately responsible for paying the tax. Manufacturers, wholesalers and retailers are all VAT collectors in the supply chain.

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

The State’s territorial sea is included in the State’s territory for VAT purposes. Twelve nautical miles is the boundary of the State’s territorial sea.

This paragraph explains:

Exemption from VAT reverse charge (self-accounting) qualifying activities VAT and fraud who are taxable and accountable.

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 responsible for their actions?
Individuals, partnerships, and corporations are all examples of “accountable persons.”

is obliged to register for VAT if they provide taxable products or services in the state.
As a result, they must collect sales tax from customers in 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 allowed to register for VAT in relation to 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 is also selling taxable goods or services.

VAT registration, on the other hand, only applies to taxable goods.

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

See our VAT property and construction section for special provisions.

What is reverse charge (self-accounting)?

Customers often pay Value-Added Tax (VAT) when they purchase products or services from a vendor. However, in other cases, the recipient, rather than the seller, is responsible for paying the VAT.

For example,

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
the receipt of greenhouse gas emission permits from another taxable person established in the State or abroad by certain categories of persons in the State through the natural gas distribution system or electricity. For further in-depth information, please refer to the following links.
A taxable person conducting a business in the State that includes or includes trading in scrap metal or providing construction services in the State whose ownership of the products is transferred to NAMA by virtue of a vesting order.

What are qualifying activities?

Costs incurred in making taxable deliveries of goods or services are eligible for VAT reimbursement.

If you incur charges for one of these nontaxable activities, however, you can claim VAT back on the VAT you paid. ‘Qualifying activities’ are what you’d call those actions.

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. For this to work, the provider must be VAT-registered in the other EU Member State in question.
the issuance of new stocks, new shares, new debentures, and other new securities in order to raise capital for a responsible person’s taxable supplies of goods or services outside the State that would be taxable supplies if made in the State, certain financial and insurance services provided outside the EU or directly in connection with the export of goods to an outside the EU

VAT fraud

A Value Added Tax (VAT) fraud can have serious repercussions for those who are caught up in it. Even if the transactions in which you are participating are not illegal, this is nevertheless a violation of your civil liberties.

Revenue will impose penalties when necessary, and you have the following options:

you will no longer be eligible to claim VAT back

VAT will be imposed on previously zero-rated intra-Community shipments if the transactions involved are linked to fraud.

More thorough information on preventing VAT fraud can be found in the further guidance.