Value Added Tax (VAT) must be paid on most goods and services at each stage of production and distribution.

Business owners may need to register for and charge Value Added Tax (VAT) on their goods or services. The VAT rates you’ll pay will depend on what you are selling and where, so we understand that charging and claiming VAT can seem confusing.

In this guide, you’ll learn how to charge VAT on both goods and services in Ireland, in EU countries, and in non-EU countries, as an Irish business.

If you think you need to register for VAT, check out our guide on how to register for VAT in Ireland or talk to a member of our team today for help getting started.

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This guide will help answer some of the most common VAT queries. Note that this is general information. You should always seek professional advice from your accountant or tax advisor. If you need specific advice at any point, feel free to talk to our Client Services Team about our accounting services.

When to register for VAT in Ireland?

  1. When you reach the turnover threshold. The threshold for the sale of services is €37,500 while the threshold for the sale of goods is €75,000.
  2. When you receive goods from the other EU Member States over the value of €41,000. These are known as Intra-Community Acquisitions (ICA).
  3. When you receive services from outside of Ireland. When receiving services from outside of Ireland, there is no threshold for VAT if the place of supply of the service is in Ireland. You may need to register your business for VAT to account for VAT on that supply.

Some businesses may elect to register for VAT before they meet any of the above criteria, but you should speak to an accountant about your situation first. Get in touch with our Client Services Team to receive a quotation for accountancy services.

What rate of VAT to charge?

There are different VAT rates for various goods and services. You can use Revenue’s VAT rate database to find the correct VAT rate to charge. If you supply goods and services, you may need to charge different VAT rates.

Each business is different so talking with a professional about your specific circumstance helps us to give you the correct advice!

Talk to our Client Services Team if you need help with your VAT and bookkeeping requirements in Ireland. We’re here to help!

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The most commonly used VAT rates in Ireland

  • The standard rate of VAT is 23%. Any goods and services that don’t fall into one of the reduced rate categories are charged VAT at this rate.
  • The reduced rate of VAT is 13.5%. This rate applies to tourism-related activities such as hotels, restaurants, cinemas, and hairdressing. Building services and photography also qualify for this rate.
  • 9% is a special rate for newspapers, electronically supplied newspapers, e-books, and sporting facilities.
  • 4.8% is the livestock rate of VAT – specifically for agriculture. It applies to livestock (not including chickens), greyhounds, and the hire of horses.
  • 0% (Zero) VAT on all exports, tea, coffee, milk, bread, books, children’s clothes and children’s shoes, oral medicine for humans and animals. Providers of these goods charge a 0% VAT rate and can claim VAT on their purchases.
  • Exempt: There is no VAT on certain financial, medical, or educational providers.

Selling goods to private consumers (B2C) in Ireland and other EU countries

VAT is usually charged on top of your usual sale price when you are selling to private consumers in Ireland. The customer will pay the VAT over to you and it’s your responsibility to report and pay this VAT to Revenue.

If you exceed the VAT distance selling thresholds when selling goods to private consumers in other EU Member States you must register for VAT. Each Member State may have a different distance selling threshold.

You need to check the VAT rate and threshold for the sale of goods in each country you are selling to. We also recommend speaking to an accountant in that country. 

VAT OSS and VAT IOSS

If you supply goods cross-border to final consumers, you may be eligible to register for VAT One-Stop-Shop (VAT OSS) and VAT Import-One-Stop-Shop (VAT IOSS). VAT OSS registration means businesses only need to register for a VAT number in one country rather than in all the countries where sales are made. This makes VAT declarations easier and quicker.

As always in VAT, there are exceptions to these rules, so we recommend speaking to a professional for advice on your personal situation.

Selling goods to other businesses (B2B) in Ireland and other EU countries

If you ssupply goods to other businesses in Ireland, you must charge and account for VAT in your VAT Return to Revenue. Any VAT you charge must be paid to Revenue in a VAT Return – usually bi-monthly (every two months).

Selling goods B2B within the EU is also called “Intra-Community Supply (ICS)”. You can apply a zero-rate (0% VAT) on the supply of goods to business customers if they have a VAT number.

You can apply the zero-rate of tax if the following conditions are met:

  • The business customer is registered for VAT in a different EU Member State
  • You have your business customers’ VAT number (including country prefix)
  • Your VAT number and the business customers’ VAT number are visible on the sales invoice
  • The goods are being dispatched or transported to another EU Member State; and
  • The correct VIES Returns are made (an Intrastat Return may also be required depending on the volume of sales).

What is the cash basis of accounting?

There are 2 bases for accounting for Value Added Tax (VAT): 

  • Invoice basis of accounting 
  • Cash basis of accounting 

Normally, you must account for VAT on goods and services you sell using the invoice basis of accounting – in other words, you must account for VAT when you issue the invoice to your customer. This means you could end up having to pay that VAT over to Revenue before you receive payment from the customer. 

Under the cash basis of accounting, also known as the receipts basis or moneys received basis, you can wait until you receive payment to account for VAT. 

If you are registered for VAT, you may be entitled to use the cash basis for accounting if: 

  • Your turnover does not exceed or is not likely to exceed €2 million in a 12-month period 
  • At least 90% of your customers are not registered for VAT or entitled to claim a full deduction of VAT on goods you have sold them. This is usually the case if your business sells mainly to private individuals, and not other businesses 

What is VIES?

VAT Information Exchange System (VIES) is an EU system that allows a supplier to apply 0% to the supply of goods.

VIES is used to ensure that the 0% tax rate is being applied correctly and not being abused. Information is shared between domestic and EU tax authorities to help detect unreported movements of zero-rated goods between EU countries.

Businesses can check VAT numbers on the European Commission’s VIES VAT number validation website.

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What is an EORI number?

If you import or export goods into or out of the EU you need an Economic Operators Registration and Identification (EORI) number. This is a reference number for customs authorities in the different EU countries.

You may already have an EORI number, aligned with your VAT number – you can check if you are registered on the European Commission website.

To find out whether you need an EORI number and how to apply, visit the Revenue website.

Selling goods to private consumers (B2C) outside the EU

If you sell goods to private consumers outside of the EU, you do not need to charge VAT. Please note that due to Brexit, this includes Great Britain.

However, you can still deduct the VAT that you paid on any related expenses to make that sale.

Irish business owners can deduct VAT through a VAT return to Revenue. If you need help with your VAT obligations, talk to our Client Services Team about the services we offer to help with your Irish VAT.

Selling goods to businesses (B2B) outside the EU

If you sell Irish goods to businesses outside of the EU, you do not need to charge VAT. Therefore, it is also called zero-rated (0%). Please note that due to Brexit, this includes Great Britain.

There is no VIES system for non-EU businesses. You are responsible for ensuring that there is enough evidence to prove that your customer is a business and is established outside the EU. You also need proof that the export has taken place.

VAT on services: place of supply

When your business sells services, there are “place of supply” rules that apply.

There are two general “place of supply” rules depending on whether the recipient is a business or a private consumer.

  1. For supplies of business to consumer services (B2C), the place of supply is (generally) the place where the supplier is established.
  2. For supplies of business to business services (B2B), the place of supply is (generally) the place where the business receiving the services is established.

There are many exceptions to the general place of supply rules and care must be taken in this area.

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Selling services to private consumers (B2C) in Ireland and other EU countries

If your business sells services to private consumers in Ireland and the EU, the place of supply is (generally) the place where the supplier is established.

This means that you (the business owner) will account for VAT on any services that are being sold to private consumers in Ireland and other EU member states. VAT would be included in your fees and therefore the consumer will pay the VAT over to you. You will then account for this VAT in your VAT returns and pay the VAT charge to Revenue. Check out our page on how to register for tax for more information.

If you supply telecommunications, broadcasting, and e-services (“TBE”) to private consumers, you may be aware of VAT MOSS. However, note that on the 1st of July 2021, new VAT e-commerce rules will come into force and VAT MOSS will be replaced by VAT One Stop Shop (OSS). If your business carries out EU cross-border supply of services on a Business to Consumer (B2C) basis, you can register for VAT OSS.

There are many exceptions to this rule so always consult with your accountant.

What is VAT MOSS?

Value Added Tax Mini-One-Stop-Shop (VAT MOSS) is a simplification measure. It reduces the administrative burden for businesses that supply TBE to non-taxable persons, i.e B2C supplies. Note that on the 1st of July 2021, VAT MOSS will be abolished, and replaced with VAT One-Stop-Shop (VAT OSS).

Registering for VAT OSS is optional but if you don’t avail of this scheme you will be required to register, charge, and account for VAT in each EU Member State you supply B2C services to.

We recommend you speak to an accountant if you think you might be eligible for VAT OSS registration. Get started by ensuring your business is registered for the correct taxes. Our Client Services Team is always happy to help you choose the best accounting and compliance services for you.

Selling services to other businesses (B2B) in Ireland and other EU countries

If you supply services to other businesses in the EU, the reverse charge will normally apply. This means that the recipient will account for VAT on the purchase in their VAT return.

What is the reverse charge?

In most cases, VAT is charged by the seller of goods or services. However, when you buy goods or services from a supplier in another EU country the reverse charge will apply and you (the buyer) will be responsible for reporting the VAT.

The aim of the reverse charge is to have VAT applied in the Member State where the customer is based, rather than where the supplier is based. This is known as the Member State of consumption. This only applies to B2B transactions.

The reverse charge means that the responsibility to report the VAT to the tax authorities falls to the customer, and their domestic rate of VAT applies. The VAT is reported in the customer’s local VAT return and does not appear in the supplier’s VAT return.

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For the reverse charge to apply certain criteria must be met.

  • An invoice must be issued to the business customer indicating that “reverse charge will apply”
  • The customer’s VAT number must be quoted on the invoice.

There are many different rules that apply to the reverse VAT charge. They are available to read on the Revenue website.

Selling services to private consumers (B2C) outside the EU 

You can generally supply services to non-EU private customers free of VAT by providing proof that the customer is based outside of the EU.

Businesses will need to obtain verified information, such as credit card pre-authorisation, that confirms the address associated with the card number, to supply services to consumers (B2C) without VAT.

Selling services to other businesses (B2B) outside the EU 

If you supply services to another business outside of the EU, no Irish VAT is charged.

You need to prove that your customer is a taxable person. This proof can be a VAT number or similar number which is used to identify the business outside of the EU.

Receipt of B2B services from outside of Ireland

If you are in receipt of services from another EU Member State or non-EU country outside of Ireland, the reverse charge rule also applies. The aim is for VAT to be accounted for in the jurisdiction of the customer, in this case, Ireland.

As a business owner, you are responsible to account for VAT on receipt of these services under the reverse charge. You must account for this VAT in your Irish VAT return at the appropriate rate of VAT in Ireland.

You will treat it as if you made the supply to yourself and charge yourself the VAT on the supply. This VAT is then owed to Revenue. If you are entitled to a deduction you may claim a simultaneous deduction for the cost of the service in the same VAT return. The result often leaves the taxpayer in a VAT-neutral position. However, as always, there are exceptions to this rule, particularly in cases where the taxpayer is not entitled to recover all of the VAT they incur.

What happens if you charge VAT incorrectly?

If you charge VAT incorrectly, you may need to pay interest and penalties to Irish Revenue.

This means that it’s important you know how to charge Value Added Tax correctly once you become VAT registered. You also need to ensure you know how to correctly file VAT returns and claim VAT back on business expenses.

Get in touch with our team of Chartered and Certified Accountants. We’re here to give you peace of mind that your accounting and compliance requirements are taken care of.

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Our team of professionals has guided many businesses through setting up and processing VAT. We understand the need to get your business set up correctly from the start. Talk to us today about outsourcing your VAT obligations.

If you have any questions or are unsure whether your business is liable for VAT reach out to a member of our Client Services team today – they’ll be happy to help you.

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