VAT Summary



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Contrary to general opinion Value added tax is one of the more complex areas of tax law. VAT chargeable on the supply of goods and services within the State by a taxable person in the course or furtherance of any business carried on by him, and on goods imported into the State from outside the EU. 
VAT is also chargeable on the intra-Community acquisition of goods by VAT registered persons and on the intra-Community acquisition of new means of transport such as motor vehicles, boats etc. by either a registered or unregistered person. 

The amount on which VAT is chargeable is the total consideration which the person supplying goods or services becomes entitled to receive. Taxable persons account for VAT on their outputs and they are allowed credit against this liability for tax borne on business purchases and other inputs as evidenced by correctly prepared VAT invoices. 

Taxable persons (generally, people or corporate entities in business) must be registered with the Revenue Commissioners for VAT purposes where the amount of their annual turnover (i.e. the amount of receipts excluding VAT) from the supplies of taxable goods and services exceeds or is likely to exceed certain limits. For suppliers of goods the limit is Euro75,000 . For suppliers of services the limit is Euro37,500.
Farmers, sea fishermen and traders whose turnover is below these limits are not generally obliged to register for VAT, but they may do so if they wish. 

Accounting for VAT

Generally VAT must be accounted for on an accruals basis (i.e. when sales are invoiced, not when cash is received). There is an exception to this rule for small businesses whose turnover over a 12 month period does not exceed Euro1million. These small businesses may account for VAT on a cash accounting basis. Returns are made every 2 months although Revenue have introduced less frequent return requirements where VAT liabilities are small.

The main VAT rates are:

Details are set out in the First Schedule to the VAT Principal Act. Those carrying on exempted activities cannot, with some minor exceptions, register for VAT.
Zero Rate
Details of goods and services taxable at this rate are set out in the Second Schedule to the Principal Act.
13.5% Rate
Details of goods and services taxable at this rate are set out in the Sixth and Eight Schedules to the Principal Act.
21% Rate
All goods and services which do not fall into the categories mentioned above are liable to VAT at this rate.

When is VAT not deductible ?

No deduction is allowed in respect of tax paid on expenditure on the following:
(a) The provision of food, drink, accommodation or other personal services supplied to the taxable person, his agent, or his employees.
(b) Entertainment expenses incurred by the taxable person, his agent or his employees.
(c) The acquisitions, hiring or leasing of motor vehicles other than as stock in trade or for the purposes of a business which consists in whole or part of the hiring of motor vehicles or for use in a driving school business for giving instruction.
(d) The purchase of petrol otherwise than as stock in trade.
(e) Expenditure incurred on food, drink, accommodation or other entertainment services as part of an advertising service is not deductible in the hands of the person providing that advertising service.
(f) Any VAT incurred by a taxable person in a transaction where the margin or auction schemes apply.

Where the activities carried out are exempt or partially-exempt only the VAT that relates to the non-exempt activities is deductible.


VAT on property transactions is a complex area of tax law. How are you affected?









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