VAT rates in Ireland
Ireland currently applies three standard VAT rates: Standard Rate (23%), Reduced Rate (13.5%), and Zero Rate (0%).
The Standard Rate applies to most items, while the Reduced Rate applies to certain items like food, electricity, and gas. The Zero Rate applies to certain goods and services, such as exports, children’s clothing, and newspapers. This is an essential aspect of VAT in Ireland as it affects the pricing of goods and services. Businesses should know the applicable VAT rates to comply with the law.
VAT registration
Businesses that exceed a specific turnover threshold are required to register for VAT. The current thresholds are €80,000 for goods and €40,000 for services. Businesses below these thresholds may choose to register voluntarily.
Once registered, businesses must charge VAT on their taxable supplies and file VAT returns with the Revenue Commissioners regularly.
The exact VAT requirements may vary based on your business type and circumstances. However, here are the standard documents and information usually required for VAT registration in Ireland:
- TR1 Form: You must complete and submit the TR1 form, the application form for VAT registration in Ireland. This form collects basic business information, including your name, address, contact details, and legal structure.
- Proof of Identity: Business owners or directors may need to provide identification documents, such as a driver’s license.
- Proof of Business Address: Documentation showing the business address, such as a bill or lease agreement, may be required.
- Company Registration Details: If your business is a company, you must provide its registration details, including the company registration number and incorporation certificate.
- Description of Business Activities: You must describe what your business does and what goods or services you offer.
- Details of Turnover: Information about your expected turnover for the upcoming year is typically required.
- Bank Details: You may need to provide bank account details for the business, including the bank name, account number, and sort code.
- Tax Reference Number: If you’re already registered for other taxes in Ireland, such as income tax or corporation tax, you’ll need to provide your tax reference number(s).
- Evidence of VAT Registration in Other Countries: If you’re already registered for VAT in another country, you may need proof of this registration.
- Additional Supporting Documents: The Revenue Commissioners may request additional documentation depending on the nature of your business and specific circumstances.
What is Two-Tier VAT Registration
Two-tier VAT registration is a simplified VAT registration system for small businesses with a turnover below €1 million.
This system allows businesses to reclaim VAT on their purchases but does not require them to charge VAT on their sales. Small businesses may find this a beneficial option to keep their administration costs low.
However, it is important to note that businesses registered under the two-tier system cannot claim back VAT on their purchases of capital goods, providing a simplified option for small businesses.
VAT Invoicing
VAT-registered businesses must issue VAT invoices to their customers for all taxable supplies. We recommend using online accounting software to streamline this process.
Invoices for VAT must include:
- The supplier’s VAT registration number
- Description of goods or services sold
- The applicable VAT rate
- The total VAT amount.
VAT invoices must also be issued within 15 days of the supply being made. This ensures that businesses give customers the correct information to reclaim VAT on their purchases.
Distance selling
When a registered business supplies goods or services to a customer in another EU country, the applicable VAT rate depends on the customer’s location.
If the customer is in another EU country, the business must charge the VAT rate of that country. However, there are some exceptions to this rule. For example, if the business supplies goods or services to a non-taxable person in another EU country, the business does not need to charge VAT. This is an essential aspect of VAT in Ireland as it ensures that companies comply with the VAT rules of other EU countries.
VAT exemptions
Certain goods and services, for example, healthcare and education, are exempt from VAT. This means that businesses do not need to charge VAT on these supplies. However, businesses can still reclaim VAT on purchases of goods and services used to make exempt supplies. This ensures that companies are not unfairly disadvantaged by VAT in Ireland.
VAT returns
Registered businesses must file VAT returns with the Revenue Commissioners regularly.
VAT return frequency depends on its turnover. Businesses can file returns bi-monthly (every two months), four monthly, or six monthly.
Due Date for Filing and Payment
The due date for filing VAT returns and making payments depends on the frequency chosen by the business:
- Bi-monthly: Returns and payments are due by the 23rd day of the month following the end of the taxable period. If the taxable period is January and February, the return and payment are due by March 23rd.
- Four monthly: If your annual VAT liability is between €3,001 and €14,400. Returns and payments are due by the 23rd day of the month following the end of the taxable period. For instance, if the taxable period is January to April, the return and payment are due by May 23rd.
- Six monthly: If your annual VAT liability is between €3,000 or less. Returns and payments are due by the 23rd day of the month following the end of the taxable period.
Payment to Revenue Commissioners
Registered businesses must pay the VAT they collect from their customers to the Revenue Commissioners within a specified timeframe.
The payment deadline is the 23rd of the month following the end of the VAT return period. Businesses can pay their VAT online or by bank transfer.
Stay ahead of VAT requirements
Contact our team today to delve deeper into how our expert VAT services can streamline your business operations and ensure compliance with Ireland’s VAT regulations. Whether you’re seeking guidance on VAT registration, optimising your invoicing processes, navigating complex VAT rates, or understanding exemptions, our experienced professionals are here to assist you every step.
Reach out to us today to schedule a consultation and discover how our tailored VAT solutions can help your business thrive in Ireland’s dynamic tax landscape. Let’s explore how we can maximise your VAT efficiency and minimise compliance risks, empowering your business for success.
Kiera leads the Bookkeeping, VAT, and Payroll Teams at Accountant Online. Kiera has worked in the financial services industry for over 18 years. She is passionate about helping businesses to get their finances in order so they can get back to what’s important: running your business. Kiera holds a part-qualified accountant qualification from ACCA.