Value Added Tax (VAT) is a tax that is paid on most goods and services at every stage of production and distribution. As a business owner, you may need to register for VAT and therefore charge VAT on your goods/services.
There are different VAT rates depending on what you are selling and to where, so we understand VAT can be confusing.
In this guide, you’ll learn how to charge VAT in Ireland, EU and internationally. It’ll go through VAT on services and goods so can get a full overview of charging VAT in business.
But please note that this is general information and you should seek professional advice from your accountant. 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?
- You reach the turnover threshold. The two main sale thresholds for VAT are; €37,500 for the sale of services and €75,000 for the sale of goods.
- The business receives goods from the other EU Member States over the value of €41,000, also known as Intra-Community Acquisitions (ICA).
- The business receives services from outside of Ireland. There is no threshold for VAT if you receive services from outside Ireland, and the place of supply of the service is in Ireland. Your business may need to register for VAT in order 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.
Use Revenue’s VAT rate database to find the correct VAT rate to charge.
You can also outsource your accounting requirements to a professional team, such as Accountant Online. Talk to our Client Services Team if you need help with your VAT and bookkeeping requirements in Ireland. We’re here to help!
The most commonly used VAT rates in Ireland
- 23% is the standard rate of VAT. All goods and services that do not fall into the reduced rate categories are charged at this rate.
- 13.5% is the reduced rate of VAT. This rate covers tourism-related activities including restaurants, hotels, cinemas, and hairdressing. Building services and photography also fit into the bracket for this rate.
- 9% is a special rate for newspapers and sporting facilities. This also includes e-books and electronically supplied newspapers.
- 4.8% is the livestock rate of VAT – specifically for agriculture. It applies to livestock (excluding 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 animal. Please note, providers charge a 0% VAT rate and are entitled to claim VAT on their purchases.
- Exempt: There is no VAT on certain financial, medical or educational providers.
Covid-19 VAT rate change
From the 1st of March 2021, the standard rate of Irish VAT will revert from the reduced rate of 21% back to 23%.
The standard rate of VAT applies to a wide range of goods and services so please get in touch with your accountant if you need to understand how this will affect your business.
What do you need to do?
You’ll need to consider how this will affect your existing invoices and expenses as your costs may increase. If your business is VAT registered and charges the standard rate, you’ll need to ensure you’ve taken the necessary actions to implement this change.
Please get in touch with your accountant or your VAT team if you have any questions about your specific circumstance. You can also talk to our Client Services Team to learn more about our accounting and compliance services.
Here are some things you need to consider:
- Revert to the 23% VAT rate on your online bookkeeping system. The 23% rate should already be set up, so you need to make sure that this is the rate being applied from the 1st of March 2021.
- Consider how this VAT change will affect your pricing and do you need to contact your suppliers or customers? For instance, our fees will be reverting to 23% VAT and we will be making this adjustment for all our clients on direct debit. If you are paying via standing order, you will need to make the VAT adjustment through your bank.
- Understand how to treat credit notes, advance payments, and existing contracts.
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. Your customer pays the VAT over to you and you are responsible for reporting and paying this VAT to Revenue.
If you are selling goods to private consumers in the other EU Member States, you must register for VAT if you exceed the VAT distance selling thresholds in that Member State. Each Member State may have a different distance selling threshold.
For example, in Ireland, the distance selling threshold for the sale of goods is €35,000, however, the UK has a threshold of £85,000.
You need to check the VAT rate and threshold for the sale of goods in each country you are selling to and you should also speak to an accountant in that country.
As always in VAT, there are exceptions to these rules, so we recommend speaking to a professional to determine and understand your personal situation.
Selling goods to other businesses (B2B) in Ireland and other EU countries
If you sell goods to other businesses in Ireland, you must charge VAT and account for it in your VAT Return to Revenue. All the VAT you charge must be paid over to Revenue in a VAT Return – usually every two months (bi-monthly).
Selling goods B2B within the EU is also called “Intra-Community Supply (ICS)”. If your business customers have a VAT number, you can apply a zero-rate (0% VAT) on that supply.
You can apply the zero-rate if the following conditions are met:
- The business customer is VAT registered 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 is 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 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 the 0% 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 member states.
Businesses can check VAT numbers on the European Commission’s VIES VAT number validation website.
Selling goods to private consumers (B2C) outside the EU
If you sell goods to private consumers outside of the EU, you do not 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 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. It is your responsibility to ensure that there is enough evidence to prove that your customer is established outside the EU and is a business. 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.
- For supplies of business to consumer services (B2C), the place of supply is (generally) the place where the supplier is established.
- 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.
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.
However, it’s important to note that if you supply telecommunications, broadcasting and e-services (“TBE”) to private consumers, the place of supply is where the consumer resides. Instead of having to register, charge and account for VAT in each EU Member State, a system called VAT MOSS has been introduced.
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 that reduces the administration burden for businesses that supply TBE to non-taxable persons, i.e B2C supplies.
Registering for VAT MOSS 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 TBE services to.
We recommend you speak to an accountant if you think you might be eligible for VAT MOSS 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 and therefore the recipient will account for the VAT on the purchase in their VAT return.
What is the reverse charge?
The aim of the reverse charge is to have VAT applied in the Member State of consumption (i.e. where the customer is based) rather than the Member State of the supplier. It only applies to B2B transactions.
The reverse charge means 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.
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” and the customer’s VAT number must be quoted on the invoice.
There are many different rules that apply to reverse charge and they are available 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 can verify 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 outside of Ireland, being another EU Member State or a non-EU country, the reverse charge rule also applies. The aim, again, 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 it’s important you know how to charge VAT once you become VAT registered. You also need to ensure you know how to correct 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. Call us on +353 (0)1 905 9364 or email firstname.lastname@example.org.
If you’ve gotten this far, you may still have questions about your situation. Charging VAT is a very important topic and we understand the need to get it right!
Our Chartered and Certified Accountant are here to help you! Get started by talking to us about our accounting and compliance services.