VAT is a tax imposed on certain goods and services. Different VAT rates apply depending on the goods and services being provided. Depending on where and how you are doing business, there can be a lot of different VAT rules to get your head around, however as a general rule, businesses collect VAT from their customers and file VAT returns with Revenue.
Under tax law, you are required to register for VAT when your turnover exceeds (or is likely to exceed) the VAT threshold in any continuous 12-month period. The main thresholds are €37,500 if you are supplying services only, €75,000 if you are supplying goods, €10,000 if you are making mail order sales or engaged in distance selling of certain goods or services. You can find more information on VAT thresholds and who should register for VAT in the VAT registration section of the Revenue website.
Your VAT Return
You must file and pay your VAT by the 23rd day of the month if you file via ROS (otherwise you must file by the 19thday of the month) following the end of each taxable period. You must also complete a Return of Trading Details each year.
An advantage of registering for VAT is that you can reclaim the VAT you pay when you purchase certain goods and services that for use in your business. You must retain proof of these purchases (invoices and receipts) to support your claim for repayment of VAT. You submit your claim through your VAT return. The time limit for submitting a claim is four years.
Note that you cannot claim VAT on all of the expenses you incur. Food, drink or other personal services, accommodation and entertainment are examples of expenses where VAT cannot be reclaimed. You can find more information about they types of VAT you can and cannot reclaim on the Revenue website.
If you supply services to a customer in another EU country, your customer must account for the VAT that is due under the EU’s reverse charge rules. You must obtain the customer’s VAT number and include it on your invoice and your invoice must indicate that the reverse charge applies. You can find out more about reverse charge accounting on the Revenue website.
Doing business within the EU also means that you must comply with the EU’s VIMA requirements See our blog— Get to grips with VIES, Intrastat and Mutual Assistance—for more details of these requirements.
Customers outside the EU
While supplies of services to business and private customers outside the EU are generally not subject to VAT, it is very important to confirm the customer’s tax status and retain proof that they are established outside the EU. This is because if you do not charge VAT, and cannot prove that the customer is not established in the EU, you could have to pay the VAT yourself. You could also have to pay Revenue interest and penalties.
Note on VAT and Relevant Contracts Tax
While VAT is usually charged by the person supplying goods and services, under Relevant Contract Tax in the construction sector, the person receiving the goods or services is responsible for collecting the VAT and paying it over to Revenue. This means that if you are a Principal Contractor for RCT purposes, you have to apply Reverse Charge VAT (RCV) to the invoices you receive from your subcontractors.
If you are a GroForth client, our team can help you with your VAT returns. Contact us for details of our services.