What is Value Added Tax (VAT)?
VAT is a tax that is added on to the value of goods and services at every stage of production or distribution. As a consumer, most of the goods or services that we purchase have VAT included in the price.
As a business owner, once you complete VAT registration in Ireland, you are obliged to charge VAT on the products and services you sell. You also need to account for VAT in your VAT returns and pay VAT liability to Revenue, usually every two months.
VAT can be a tricky topic because there are a lot of different scenarios. For example, there are different VAT rules for selling goods or selling services. As well as that, there are different guidelines that apply to how you charge VAT in Ireland, the EU and Internationally.
This guide goes through what you need to know about the VAT application process and how to get a VAT number in Ireland. We always recommend you speak to an accountant if you have any questions about VAT registration in Ireland. Our Client Services Team is always happy to talk you through our services so you can be assured you have expert support and guidance for your new business.
You don't need to register for VAT straight after incorporation, except in certain circumstances
In general, as a new business, you don’t need to register for VAT from the moment your business is set up. There are certain criteria your business must meet before you start charging VAT on your goods/services.
It’s important to note that both Sole Traders and Limited Companies are eligible to register for VAT and you should consult with an expert about registering for VAT before you do so.
VAT registration is mandatory if you meet any of the following criteria:
- Selling over €37,500 for the sale of services or €75,000 for the sale of goods means your company needs to register for VAT in Ireland. This is a sale threshold amount over the course of 12 months (not calendar year)
- In receipt of goods from the other EU Member States over the value of €41,000, also known as Intra-Community Acquisitions (ICA)
- In receipt of any services from outside of Ireland. If you receive services from outside Ireland and the service is being used in Ireland, your business may need to register for VAT.
You can choose to voluntary register for VAT
You may choose to register for VAT if you deal with a lot of other businesses that charge VAT. The downside to this is that you need to file bi-monthly VAT returns to Revenue. This could be a considerable extra cost for a small business.
Speaking to one of our professionals will help you decide if you should complete VAT registration in Ireland.
Why would I voluntarily register for VAT?
Some businesses choose to register for VAT because:
- You can claim back the VAT you have paid on your purchase if you are VAT registered and have business expenses
- You can add VAT onto your products or services from the beginning instead of having to change your prices or add VAT later on
We always recommend discussing your situation with your accountant before deciding whether you should elect to register early or not.
What are the VAT rates in Ireland?
“VAT rates” refer to the percentage of VAT you will charge on your product or service.
In Ireland, the standard rate of VAT for services is 23% and there are other percentages you should be aware of. You can see a complete database of VAT rates on the Revenue website here.
How to register for VAT?
To receive a VAT number in Ireland, you need to fill in a tax registration form and submit it to Revenue. During the VAT registration process, Revenue will want to see evidence that you have trade with Ireland.
Revenue decides whether to accept or reject your application based on the evidence you submit.
If Revenue rejects your application, it doesn’t mean you will never get a VAT number. You may need to spend some time gathering the relevant documents and you can re-submit your application at a later stage.
Things to note before you apply for a VAT number
You need proof you require a VAT number
- The business has trading activity in Ireland
- You have invoices from Irish suppliers and customers
- The business owner/Director lives here
- You have a physical office in Ireland, a Virtual Office will not be accepted
Reasons why Revenue might reject your application
- You’re not hiring employees in Ireland
- No customers in Ireland
- You are not trading with any suppliers in Ireland
- The Directors are not based in Ireland
How long does it take to get a VAT number in Ireland?
Once Revenue has received your VAT application, it can take 28 working days before you have your VAT number, and this is without any enquiries from Revenue.
Revenue may need you to answer questions about your trade or submit additional evidence before you receive your VAT number. If they do, they will usually give you 30 days to reply to an enquiry, but it’s important to reply to them as soon as possible.
How to charge VAT?
There are different rules on how to charge VAT. Factors such as what you are selling, to whom and where all have implications on how your business charges VAT. We have a full guide on how to charge VAT in Ireland, the EU and internationally here.
What scenario describes your business? There are different VAT requirements for each situation so if you would prefer to outsource your VAT obligations to an accountant, get in touch with us today.
What are VAT returns?
A VAT return outlines the invoices that you have charged VAT on and the invoices that you have claimed VAT on for a given time period.
When you are VAT registered, you must file your VAT3 returns by the 19th day of the month following the end of each taxable period or by the 23rd day of the month if you file via ROS (Revenue Online Service).
The taxable period is a two-month period (bi-monthly) that starts on the first day of January.
For example, the return for VAT period 1 (1st January – 28th February) must be filed on the 19th of March or by the 23rd of March if filed online using ROS.
If you do not file your VAT returns or under-declare your VAT, you can incur fines and penalties.
How do I cancel VAT registration?
If you wish to cancel your VAT registration, you should notify the Irish Revenue Commissioners as soon as possible. Your VAT registration can be cancelled if:
- Trade has ceased,
- Your turnover has fallen below the relevant turnover threshold,
- VAT registration has been submitted in error,
- The nature of your business has changed and you are no longer making taxable supplies.
What if I elected to register for VAT?
As discussed, you may elect to register for VAT even if you do not reach the VAT threshold. If you have elected to register for VAT you may cancel your registration by notifying the Revenue Commission.
Please note, cancelling your VAT registration may result in VAT liability. You must pay Revenue any excess of VAT refunded to you over the tax period. This applies to any excess of VAT refunded from the time you elected to register for VAT or during the 3 years prior to cancellation.
If you don’t notify your Revenue office, return forms and demands for estimated VAT liability will continue to be issued automatically.
What do I need to do next?
Are you a newly incorporated company in search of Tax Registration? We have a unique Startup Offer for accountancy services for new Limited Companies for just €175+VAT per month for 18 months.
Get in touch with our Client Services team on +353 (0) 1905 9364 or email email@example.com. We’re also available on online chat so we can talk about any questions you have about setting up a business in Ireland and registering for taxes.
Larissa is a Fellow Chartered Accountant (FCA) and is the Founder and CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland, Northern Ireland and the UK.
Larissa has been shortlisted for the Image ‘Businesswoman of the Year Award’ in 2017 and 2018 and awarded ‘Accountant of the Year’ in 2018. Larissa volunteers as a role model for LEO Donegal’s ‘Ambition’ programme and is a Lead Entrepreneur for ‘ACORNS’ and ‘Going For Growth’ which are development programmes designed to support ambitious female entrepreneurs, and for ‘Back For Business’, a development programme assisting returned emigrants or those planning to return to Ireland to start and develop a business. Accountant Online has won many awards, including ‘Best Small Practice’ in 2017, ‘Best Medium Practice’ in 2018, and in 2020, ‘Medium Practice of the Year’ and ‘Practice of the Year’.