Tax Toolkit / Tax Summary / Value Added Tax

Value-Added Tax (VAT) is a tax on consumer spending. It is collected by VAT-registered traders on their supplies of goods and services effected within the State, for consideration, to their customers. Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his or her sales and is entitled to deduct from this amount the VAT paid on his or her purchases.

The effect of offsetting VAT on purchases against VAT on sales is to impose the tax on the added value at each stage of production - hence Value-Added Tax. For the final consumer, not being VAT-registered, VAT simply forms part of the purchase price.

VAT RATES

23% (standard rate) This applies to all goods and services that are not exempt or liable at the zero or reduced rates
13.5% (reduced rate) This applies to certain fuels, buildings and building services etc.
13.5% This applies to certain goods and services (mainly related to tourism). This rate applies to restaurant and catering services; hotel and holiday accommodation; admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions; fairgrounds or amusement park services; the use of sporting facilities, hairdressing services; printed matter such as brochures, maps, programmes, leaflets, catalogues and newspapers.
0% These include exports, certain food and drink, oral medicine, certain books etc.
4.8% This applies to livestock.
5.4% Flat-rate compensation percentage for Farmers from 01.01.2017
Exempt These include financial, medical and educational activities.

Thresholds for Registration for VAT

In the case of supplies in the State and intra-Community acquisitions, registration is obligatory where certain turnover thresholds are exceeded or are likely to be exceeded in any twelve-month period. However, it should be noted that in relation to Distance Sales, the threshold is based on a calendar year. The principal thresholds applicable are as follows:

VAT Registration Thresholds in €

Supply of Goods €75,000
Supply of Services €37,500

While the general turnover threshold for the supply of goods is €75,000, persons supplying goods liable at the reduced or standard rates which they have manufactured or produced from zero-rated materials must register if their turnover is €37,500 or more. While the general turnover threshold for the supply of services is €37,500, for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to in the above paragraph) then the threshold for Goods applies.

Accounting for VAT on a Cash Receipts Basis

Under the normal Invoice Basis for accounting, a trader is liable to account for VAT when an invoice is issued to a customer. Under the Cash Basis (also called the Receipts or Moneys Received Basis) of accounting, a trader is liable to account for VAT when payment is actually received.

A trader must fulfill one of two criteria to be on the Cash Basis. Either

  • Annual turnover does not exceed €2,000,000 or
  • Supplies are almost exclusively (at least 90%) made to customers who are not registered for VAT, or are not entitled to claim a full deduction of VAT.

In practice, the Cash Basis of accounting is mainly used by shops, restaurants, public houses and similar businesses, and by any other person making supplies of goods or services directly to the public.

A person on the Cash Basis is nonetheless required to issue a VAT invoice when a customer is registered for VAT.

VAT Cash Accounting

The annual VAT cash receipts basis threshold for small to medium businesses is being increased from 1.25 milion Euro to 2 milion Euro with effect from 1 May 2014.

Tax Due

19th day of the month after the VAT period.

VAT not Deductible

An accountable person may not deduct VAT on any of the following, even when the goods and services in question are acquired or used for the purposes of a taxable business:

  • expenditure incurred by them on food or drink, or other personal services for themselves, their agents or employees, except to the extent, if any, that such expenditure is incurred in relation to a supply of services in respect of which they are accountable for tax
  • expenditure incurred on accommodation other than qualifying accommodation in connection with attendance at a qualifying conference as defined in the legislation
  • expenditure incurred by the accountable person on food or drink, or accommodation or other entertainment services, where such expenditure forms all or part of the cost of providing an advertising service in respect of which tax is due and payable by the accountable person
  • entertainment expenses incurred by the accountable person, their agents or employees
  • the purchase, hiring, intra-Community acquisition or importation of passenger motor vehicles other than certain qualifying motor vehicles
  • the purchase, intra-Community acquisition or importation of petrol otherwise than as stock-in-trade
  • contract work involving the handing over of goods when such goods are themselves not deductible
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