Issued by Revenue January

Transcription

1 Issued by Revenue January

2

3 Foreword The purpose of this Guide is to explain in general terms the principal features of the Irish VAT system and to update traders on all new developments and changes to that system since publication of the last Guide in July, The latest version of the Guide aims to give a broad overview of the VAT system and focuses on those issues which are likely to be of interest to the majority of VAT-registered traders and to traders who are registering for VAT for the first time. Issues of special interest are dealt with in detail in a range of VAT Information Leaflets and Statements of Practice which are listed at Appendix H and which are referred to throughout the Guide. Copies of those items and also of the Guide itself are available free of charge from all local tax offices which are listed at Appendix J. They are also available on the Revenue website at This Guide is not, and does not purport to be, a statement of the law relating to VAT. The relevant law is contained in the Value-Added Tax Act, 1972, as amended by the various Finance Acts from 1973 to 2002 inclusive, and in various Regulations and Orders all of which comply with the Sixth Council Directive of the European Union dated 17 May, 1977 (77/388/EEC). The final interpretation of VAT law in any particular case or on any point to which the appeal procedure applies is a matter for the Appeal Commissioners and the Courts. Revenue Dublin Castle. January 2003 iii

4 Charter of Rights In your dealings with the Revenue Commissioners you are entitled to COURTESY AND CONSIDERATION To expect that Revenue staff will at all times carry out their duties courteously and considerately. PRESUMPTION OF HONESTY To be presumed to have dealt with your tax affairs honestly unless there is reason to believe to the contrary and subject to the Revenue Commissioners responsibility for ensuring compliance with the law. INFORMATION To expect that every reasonable effort will be made to give you access to full, accurate and timely information about Revenue law and your entitlements and obligations under it. So that they can do this, Revenue staff are entitled to expect that you will give them all the facts and the full cooperation which they need to deal with your affairs. IMPARTIALITY To have your affairs dealt with in an impartial manner by Revenue staff who seek to collect only the correct amount of tax or duty, no more and no less. PRIVACY AND CONFIDENTIALITY To expect that personal and business information provided by you will be treated in strict confidence and used only for purposes allowed by law. INDEPENDENT REVIEW To object to a charge to tax or duty if you think the law has been applied incorrectly and to ask that your case be reviewed. If the matter cannot be resolved to your satisfaction by Revenue officials you have rights in law to independent review. COMPLIANCE COSTS To expect that the Revenue Commissioners and their staff recognise the need to keep to the minimum necessary the costs you incur in complying with Revenue law, subject to their responsibility to carry out their functions efficiently and economically. CONSISTENT ADMINISTRATION To expect that the Revenue Commissioners will administer the law consistently and apply it firmly to those who try to evade paying their lawful share. iv

5 Contents CHAPTER 1 General explanation of VAT 1.1 What is VAT? 1.2 Rates 1.3 Taxable person 1.4 Exempt persons 1.5 Non-taxable entities 1.6 Flat-rate farmers 1.7 Registration 1.8 VAT returns 1.9 Amount on which VAT is chargeable 1.10 Basis of accounting 1.11 Right to deduct VAT 1.12 Records to be kept 1.13 Intra-Community trade 1.14 Imports (non-eu) 1.15 Exports (non-eu) 1.16 Repayment of VAT to foreign businesses 1.17 Repayments to unregistered persons 1.18 Appeals 1.19 Letter of expression of doubt 1.20 Revenue internal review procedures 1.21 The Revenue website CHAPTER 2 VAT registration 2.1 Taxable persons 2.2 Thresholds 2.3 How is the threshold determined? 2.4 Exceptions 2.5 Exempt persons and non-taxable entities acquiring goods from other Member States 2.6 Fourth Schedule services 2.7 Cultural, artistic, entertainment or similar services 2.8 Option to register 2.9 Registration procedures 2.10 Registration of new business 2.11 Cancellation of registration 2.12 Relief for stock-in-trade for newly registered traders 2.13 Group registration 2.14 Who may not register in respect of supplies of goods or services? 2.15 Premises providers for mobile traders 2.16 Waiver of exemption (short-term lettings) CHAPTER 3 Supply of goods 3.1 Taxable supplies of goods 3.2 Self-supplies 3.3 Gifts 3.4 Advertising goods and industrial samples 3.5 Replacement goods 3.6 Supply of goods and services in exchange for vouchers, tokens etc. 3.7 Prepaid telephone cards 3.8 Payments received in advance deemed to be supplies v

6 3.9 Services taxable as supplies of goods (the two-thirds rule) 3.10 Auction and agency sales 3.11 Property transactions 3.12 Chain of traders 3.13 Non-taxable supplies of goods CHAPTER 4 Supply of services 4.1 What is a service? 4.2 Services taxable as supplies of goods (the two-thirds rule) 4.3 Agency services 4.4 Place of supply of services - general rule 4.5 Property (immovable goods) 4.6 Transport and related ancillary services 4.7 Cultural, artistic, sporting, scientific, educational or entertainment services 4.8 Fourth Schedule (or received ) services 4.9 Fourth Schedule services - summary table 4.10 Repair, valuation and contract work 4.11 International leasing of means of transport 4.12 Self-supplies CHAPTER 5 Amount on which VAT is chargeable 5.1 General rule 5.2 Rate of exchange 5.3 Margin Scheme and Special Auction Scheme 5.4 New motor vehicles 5.5 Certain services received from abroad 5.6 Packing and containers 5.7 Postage and insurance reimbursement 5.8 Treatment of mixed transactions - (package rule) 5.9 Returned goods, discounts, bad debts etc Dances CHAPTER 6 VAT due and VAT deductible 6.1 General rule on when VAT becomes due 6.2 How the tax point is determined 6.3 Alcohol products 6.4 Moneys received basis of accounting 6.5 Self-supplies 6.6 Right to deduct VAT - general rule 6.7 VAT not deductible 6.8 Definition of passenger motor vehicles for VAT purposes 6.9 Sales of goods on which no deduction is allowed on purchase 6.10 Businesses engaged in both taxable and exempt activities 6.11 VAT credits or deductions on purchases from unregistered farmers 6.12 VAT deductions by motor dealers 6.13 VAT deductions by dealers in agricultural machinery 6.14 Time limit vi

7 CHAPTER 7 Accounting for VAT 7.1 When VAT becomes payable 7.2 Annual returns 7.3 VAT 3 return form 7.4 Payment by direct debit 7.5 Revenue On-Line Service (ROS) 7.6 How to complete the VAT 3 return 7.7 Interest 7.8 Estimates, assessments and appeals 7.9 When VAT on new vehicles and excisable goods is payable 7.10 VAT as a preferential debt 7.11 Overpayment of VAT/unjust enrichment CHAPTER 8 Option for the moneys received or cash basis of accounting and special schemes for estimation of sales by retailers 8.1 Description of moneys received basis 8.2 Traders who may opt for moneys received basis 8.3 Excluded transactions 8.4 Procedure 8.5 VAT liability on moneys received 8.6 Withholding tax professional services 8.7 Withholding tax relevant contracts tax 8.8 Credit card transactions 8.9 Changing from invoice/sales basis to moneys received basis 8.10 Changing from moneys received basis to invoice/sales basis 8.11 Credit notes 8.12 Special schemes for estimation of sales by retailers CHAPTER 9 Invoices, credit notes etc. 9.1 Importance of invoices and credit notes 9.2 Form of VAT invoice 9.3 Time limit for issuing a VAT invoice 9.4 Settlement vouchers and debit notes 9.5 Increase in invoiced amounts 9.6 Decrease in invoiced amounts 9.7 Where a credit note is not required 9.8 Incorrect amounts of VAT invoiced 9.9 Payments received in advance 9.10 Invoices issued by unregistered persons 9.11 Electronic (paperless) invoices etc Invoices, credit notes etc. issued in foreign currency 9.13 Converting foreign currency invoices CHAPTER 10 Records to be kept 10.1 General 10.2 Records of purchases 10.3 Sales records 10.4 Discounts and price reductions 10.5 Retention of records by taxable persons 10.6 Retention of records by non-taxable persons 10.7 Microfilmed records 10.8 Electronic invoicing and storage 10.9 Inspection of records vii

8 CHAPTER 11 Intra-Community supplies 11.1 Single Market 11.2 Supplies of goods to other Member States 11.3 Certain transfers are not supplies 11.4 Branch to branch transfers of goods 11.5 Sales of new vehicles to persons in other Member States 11.6 What is a new means of transport? 11.7 Triangular transactions 11.8 Verification of customers VAT numbers 11.9 EU Commission database of VAT numbers Fraudulent claims for zero-rating Mail order and distance selling Excisable goods Intra-Community goods transport services VIES returns INTRASTAT returns CHAPTER 12 Acquisitions from other Member States 12.1 Acquisitions from other Member States 12.2 Postponed accounting with full deductibility 12.3 Liability for onward supply 12.4 Partially exempt persons 12.5 Deductibility and apportionment 12.6 Transfers 12.7 Calculation of VAT due on intra-community acquisitions 12.8 Persons required to register solely because of intra-community acquisitions 12.9 Intra-Community acquisitions by farmers Racehorse trainers Acquisitions of new means of transport Time when VAT becomes payable on new means of transport Intra-Community transport of goods INTRASTAT returns Intra-Community hire-purchase agreements CHAPTER 13 Imports 13.1 General 13.2 When is VAT not payable on goods at importation? 13.3 VAT 13A Scheme 13.4 VAT-free importation of goods destined for another Member State 13.5 Valuation for VAT purposes 13.6 Customs value declared in a foreign currency 13.7 Deferred payment 13.8 Clearing taxable goods through Customs 13.9 The importance of quoting VAT numbers correctly Credit in VAT returns for VAT on imported goods Parcel post importations of taxable goods VAT on parcel post importations of goods exceeding LQYDOXHRURI spirits, wine or tobacco Payment of VAT by foreign sender (F.D.D.) Import and export services Shannon customs-free zone Ringaskiddy free port CHAPTER 14 Exports 14.1 What are exports? viii

9 14.2 Purchases of goods by visitors and other travellers - Retail Export Scheme 14.3 Purchases for export 14.4 Records etc. required in connection with exports 14.5 Evidence of export of goods 14.6 Exports by purchasers CHAPTER 15 VAT rates 15.1 Goods and services attracting VAT at the standard rate, currently 21% 15.2 Goods and services attracting VAT at the zero rate 15.3 Zero-rating under the VAT 13A scheme 15.4 Goods and services subject to the 10% rate 15.5 Goods and services attracting VAT at the 13.5% rate 15.6 Exemptions 15.7 Difference between exemption and zero-rating 15.8 Repayments 15.9 Intra-Community acquisitions and imports Formal determination of rate Appeals against formal determinations Letter of expression of doubt CHAPTER 16 Changes in the rates of VAT 16.1 Which VAT rate must the trader apply? 16.2 Invoices 16.3 Credit notes 16.4 Payments in advance 16.5 Contracts existing at time of a change in VAT rates 16.6 Budget account sales, hire-purchase sales and other credit sales 16.7 Stock on hands on the date of a change CHAPTER 17 Building and associated services 17.1 Building and other contractors 17.2 Application of the 13.5% rate 17.3 Fixtures 17.4 The two-thirds rule 17.5 Fittings 17.6 Stage Payments 17.7 Do-it-yourself (D.I.Y.) 17.8 Property transactions CHAPTER 18 Financial Services 18.1 What are Financial services? 18.2 Law 18.3 Exempt supplies of services 18.4 Taxable supplies of services 18.5 Supplies of both exempt and taxable services 18.6 Place of supply 18.7 Insurance and insurance related services 18.8 Group registration CHAPTER 19 Main VAT Changes APPENDICES Appendix A Exempted activities Appendix B Goods and services chargeable at the zero rate Appendix C Goods and services chargeable at 10% ix

10 Appendix D Goods and services chargeable at 13.5% Appendix E Goods and services chargeable at 21% Appendix F Eighth Schedule to the VAT Act, 1972 (as amended) Appendix G Fourth Schedule to the VAT Act, 1972 (as amended) Appendix H List of Statements of Practice etc. Appendix I Sample of VAT3 return Appendix J Useful Addresses, Telephone, Fax Numbers and addresses. INDEX I x

11 Chapter 1 General Explanation of VAT This chapter sets out the basic principles of VAT. It describes how VAT works and indicates briefly who must register for VAT and what obligations this entails as regards accounting for the tax, record keeping etc.. More detail is contained in later chapters. What is VAT? 1.1 VAT is a tax on consumer spending. It is collected by VAT-registered traders on their supplies of goods and services to their customers. Each such trader in the chain of supply from manufacturer through to retailer charges the 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 purchases against sales is to impose the tax on the added value at each stage of production - hence Value-Added Tax. The final consumer, who is not registered for VAT, absorbs VAT as part of the purchase price. The following example illustrates how this works: Purchase Transactions Sale Transactions Price VAT Total Value Price VAT Total Credit Net to Paid Purchase Added Charged Sale for VAT Collector (Ex VAT) Price (Ex VAT) Price Paid General Manufacturer Wholesaler Distributor Retailer Consumer As may be seen from the above example, the consumer pays a total of IRU WKH ILQLVKHG product, of which LV9$7 Rates 1.2 The standard rate of VAT is 21%. The exceptions to the standard rate are contained in Appendices A, B, C, D and F to the Guide. There is also a special rate of 4.3% on livestock (i.e. live cattle, horses, sheep, goats, pigs, deer) as well as on greyhounds and hire of horses. A list of the rates applicable to a large range of goods and services is available on the Revenue website at 1

12 Taxable person 1.3 A taxable person is an individual, partnership, company etc. which is, or is required to be, registered for VAT. Persons, whose annual turnover from supplies of taxable goods and services, or the value of whose acquisitions of goods from other Member States of the European Union, or of certain services received from abroad, or of certain received cultural and entertainment services, exceed or are likely to exceed certain limits, are obliged to register for VAT. While persons whose turnover from taxable activities does not exceed these limits are not obliged to register, they may register for VAT if they so wish. This subject is dealt with in greater detail in Chapter 2. Exempt persons 1.4 Goods and services of the kind listed in Appendix A are exempt from VAT and suppliers of such goods and services are not obliged, nor indeed are they entitled, to register for VAT. An exception to this rule is the short-term letting of property, which allows the landlord to waive the exemption and to become a taxable person (see paragraph 2.14 of Chapter 2). Non-taxable entities 1.5 Non-taxable entities include State bodies (such as Government Departments, local authorities, health boards etc.), educational establishments (such as schools, universities, VECs etc.), public hospitals, charities, sports bodies and church bodies - in fact all groups of persons (other than private individuals) engaged in any type of non-commercial activity. These are treated for VAT purposes as exempt persons (but see paragraphs 2.5 and 2.6 of Chapter 2, and VAT Information Leaflets Nos. 2/01, 9/01, 11/01, 13/01, and SP/VAT/1/95, which cover their obligation to register for VAT in certain circumstances). A farmer may also be obliged to register in respect of the acquisition of goods from other EU Member States or in respect of certain services received from abroad (see VAT Information Leaflet No. 12/01). Flat-rate farmers 1.6 Farmers who do not register for VAT are compensated for the VAT they are charged on their purchases by means of a 4.3% flat-rate addition to the prices at which they sell their produce and services to VAT-registered persons. These farmers are known in the VAT system as flatrate farmers (see paragraph 6.11 of Chapter 6). Registration 1.7 Revenue will issue a VAT registration number to an applicant where they are satisfied that the person is carrying on a taxable business in the State. The procedure for registration is outlined in Chapter 2. VAT returns 1.8 A VAT-registered person normally accounts for VAT on a two-monthly basis (January/February, March/April etc.). The return is made on the form VAT 3 and this form together with a payment for any VAT due should be furnished to the Collector-General on or before the 19th day of the month following the end of the taxable period. For example, a return for the VAT period January/February, 2003 is due by 19 March The return form includes a Bank Giro slip for payment of tax due to the Collector-General (see Chapter 7). Traders 2

13 may submit their VAT returns using the Revenue Online Service (ROS). (See paragraph 7.5 of Chapter 7). Amount on which VAT is chargeable 1.9 The amount on which VAT is chargeable is the total sum paid or payable to the person supplying the goods or services including all taxes, commissions, costs and charges whatsoever but not including the VAT chargeable in respect of the transaction (see Chapter 5). Basis of accounting 1.10 Registered persons normally account for VAT on the invoice ( sales ) basis. This means that they become liable for VAT by reference to invoices issued and sales made by them to registered persons irrespective of whether payment has actually been received (see paragraph 6.2 of Chapter 6 and also Chapter 9). However, certain persons may opt to account for VAT on the moneys received ( cash ) basis, i.e. by reference to payments actually received by them (see Chapter 8). Right to deduct VAT 1.11 In computing the amount of VAT payable in respect of a taxable period, a registered person may deduct the VAT charged on most goods and services which are used for the purposes of the taxable business. No deduction may be made, however, for the VAT on goods and services used for any other purpose (see Chapter 6). Records to be kept 1.12 A VAT registered person must keep full and true records of all business transactions which affect his or her liability to VAT. The records must be kept up to date and must be sufficiently detailed to enable that person to accurately calculate liability or repayment and to enable the inspector of taxes to check the calculation, if necessary. Records must normally be preserved for six years from the date of the latest transactions to which they refer (see Chapter 10). Intra-Community trade 1.13 The European Single Market changed the way in which VAT is accounted for on goods moving between Member States of the EU. These transactions are no longer regarded as imports, but as intra-community acquisitions (see Chapter 12). Revised arrangements in relation to the zero-rating of the supply of goods to other Member States were also introduced (see Chapter 11). Imports (non-eu) 1.14 For VAT purposes imports are goods brought into Ireland from non-eu countries. As a general rule, imported goods are liable to VAT at the point of entry into the State, at the same rate as applies to the sale within the State of similar goods (see Chapter 13). 3

14 Exports (non-eu) 1.15 For VAT purposes exports are goods supplied subject to a condition that they are to be transported to a place outside the EU. The zero rate of VAT applies to exports of such goods (see Chapter 14). Repayment of VAT to foreign businesses 1.16 In general, persons who are engaged in business outside the State but who are not engaged in business in the State are able to claim a refund from Revenue of the VAT charged to them in respect of services and goods supplied to them for business purposes, where the VAT would be deductible by them if they were taxable persons in the State (see paragraph 6.6). Applications for such refunds may be made to the VAT Repayments Section, Accountant General s Branch, Revenue, Kilrush Road, Ennis, Co. Clare. (VAT Information Leaflet No. 1/99 gives further details). However, VAT may not be reclaimed in respect of goods for supply within the State or in respect of motor vehicles of a kind referred to in paragraph 6.8 of Chapter 6 for hiring out for utilisation within the State (see VAT Information Leaflet No. 3/99). Non-established performers who supply cultural, artistic, entertainment or similar services in the State, the VAT on which is accounted for by reverse charge by the recipient, are also entitled to reclaim input VAT subject to the normal restrictions from the VAT Repayments Section. Repayments to unregistered persons 1.17 There are special provisions for repayment of VAT incurred by unregistered persons in certain cases, e.g., on farm buildings by unregistered farmers, on certain supplies to unregistered sea-fishermen, on certain supplies to disabled persons and to diplomats. VAT Information Leaflet No. 18/01 is available on this subject. Appeals 1.18 A person has the right to appeal against Section 22 estimates or Section 23 assessments (see paragraph 7.8) or against a determination made by Revenue in relation to the rate of VAT chargeable. A person also has the right of appeal in relation to charges made in accordance with regulations, for example, in connection with an application for de-registration, and in relation to all claims for repayment. Any question of the fact or law may be brought before the Appeal Commissioners, and the taxpayer, if dissatisfied with the decision of the Appeal Commissioners, may have the appeal re-heard by the Circuit Court. Both the taxpayer and Revenue may appeal to the High Court on a point of law, and from there to the Supreme Court. Because VAT is governed by EU law, the Appeal Commissioners or any of the courts may refer the case to the European Court of Justice (ECJ). Matters which may be appealed also include: a charge to tax in connection with the issue of an incorrect invoice or an issue of an invoice showing tax by a non-registered person, compulsory group registration, refusal to allow group registration and the cancellation of an existing group registration, a determination in relation to certain sports and leisure activities, 4

15 the refusal by Revenue to authorise a person to operate as a refunding agent for the VAT Retail Export Scheme, the treatment of a person who allows supplies to be made on land owned, occupied or controlled by him/her, as jointly and severally liable with another person, in relation to unforeseen changes in market conditions affecting the economic value of an interest in property being disposed of in certain circumstances, a charge of tax in accordance with regulations, a claim for repayment, a refusal by Revenue to treat a person as a taxable person, a refusal by Revenue as to whether an expression of doubt is genuine (see 1.19 below) Letter of expression of doubt 1.19 VAT law provides that where a person is in doubt about the application of VAT law to a transaction, including the rate of VAT, s/he may lodge a letter of expression of doubt with Revenue. If the expression of doubt is accepted by Revenue as genuine, interest will not apply to any tax payable when the matter in doubt is resolved. In the event that Revenue refuses to accept that the expression of doubt is genuine, it is open to the taxpayer to have such refusal referred to the Appeal Commissioners. A Vat Information Leaflet No. 2/02 entitled A Letter of Expression of Doubt is available. Revenue internal review procedures 1.20 Where a taxpayer wishes to seek a review of Revenue s handling of his/her tax affairs, or a decision made by a Revenue official, s/he can choose that a review be undertaken at a local level either by the appropriate District Inspector or by the Regional Inspector. This request should be addressed in writing directly to the relevant person. Where a taxpayer does not wish the review to be undertaken locally, s/he can request that the review be undertaken either by The Director of Customer Services, Revenue, alone, or Jointly by the Director of Customer Services and an external reviewer (non Revenue staff) appointed by Revenue. This should be done in writing to the Internal Review Unit, Office of the Chief inspector of taxes, Setanta Centre, Nassau Street, Dublin 2. A Statement of Practice SP-GEN2/99 entitled Revenue Internal Review Procedures is available from that office. The Revenue website 1.21 The Revenue forms, guides, statements of practice, leaflets mentioned in this guide, and other information, are available on the Revenue website at 5

16 Chapter 2 VAT registration This Chapter deals with the rules relating to registration for VAT purposes. It describes who is obliged to register, who may not register, procedures for registration etc.. Taxable persons 2.1 A taxable person is one who, otherwise than as an employee, in the course or furtherance of business- (a) supplies taxable goods or services in the State, (b) makes intra-community acquisitions of goods in the State, (see Chapter 12) (c) receives taxable Fourth Schedule services (i.e. listed in the Fourth Schedule to the VAT Act, 1972 (as amended)) (Appendix G to this guide) from abroad, (see paragraphs 4.8 and 4.9 of Chapter 4), or (d) receives cultural, artistic, entertainment or similar services provided by a person not established in the State (see paragraph 4.7 of Chapter 4). As a general rule, only persons whose income is subject to taxation under the P.A.Y.E. system are regarded as employees. Taxable persons are obliged to register for VAT, and to comply with all necessary requirements arising from such registration (in particular, see Chapter 7) if any of the thresholds outlined below are exceeded, or are likely to be exceeded in a twelve month period. Thresholds 2.2 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 Selling at 2.2 (c) below, the threshold is based on a calendar year. The principal thresholds applicable are as follows- (a) (b) (c) (d) (e) (f) LQWKHFDVHRISHUVRQVVXSSO\LQJVHUYLFHV IRUSHUVRQVVXSSO\LQJJRRGVOLDEOHDWWKHRUUDWHVZKLFKWKH\KDYH manufactured or produced from zero rated materials, IRUSHUVRQVPDNLQJPDLORUGHURUGLVWDQFHVDOHVLQWRWKH6WDWH IRUSHUVRQVPDNLQJLQWUD&RPPXQLW\DFTXLVLWLRQV IRUSHUVRQVVXSSO\LQJJRRGV IRU SHUVRQV VXSSO\LQJ ERWK JRRGV DQG VHUYLFHV ZKHUH RU PRUH RI WKH turnover is derived from supplies of goods (other than of the kind referred to at (b) above) and 6

17 (g) A non-established person supplying taxable goods or services in the State is obliged to register and account for VAT irrespective of the level of turnover. A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the appropriate threshold above. However, they may opt to register for VAT. How is the threshold determined? 2.3 For the purposes only of deciding if a person is obliged to register for VAT, the actual turnover may be reduced by an amount equivalent to the VAT borne on purchases of stock for resale. Therefore the trader whose annual purchases of stock for resale are, say, > plus 9$7DW@DQGZKRVHDFWXDOWXUQRYHULVVD\ LQFOXVLYHRI9$7LVQRW obliged to register. This is because the traders turnover, after deduction of the 9$7 charged to him or her on purchases of stock, is below the registration limit of Exceptions 2.4 In the case of taxable Fourth Schedule services received from abroad (see paragraphs 4.8 and 4.9 of Chapter 4) or cultural etc. services received from a person not established in the State (see paragraph 4.7 of Chapter 4 for further details) no threshold applies and all such services are liable to VAT (see VAT Information Leaflet No. 9/01 for further details). Special rules also apply in the case of farmers and fishermen in receipt of Fourth Schedule services (see VAT Information Leaflet No. 12/01 for further details). The turnover thresholds set out in paragraph 2.2 do not apply to persons who are not established in the State. Where such persons supply taxable goods or services in the State in the course or furtherance of business, they are obliged to register and account for VAT in respect of all such supplies. Persons who make no taxable supplies in the State are neither obliged nor entitled to register for VAT in the State. (See VAT Information Leaflet No. 1/99 on foreign firms doing business in Ireland for further details). Exempt persons and non-taxable entities acquiring goods from other Member States 2.5 Exempt persons (see paragraph 1.4 of Chapter 1) and non-taxable entities (see paragraph 1.5 of Chapter 1) who acquire or are likely to acquire more than ZRUWKRIJRRGVIURP other Member States in any period of 12 months are obliged to register for VAT in respect of those intra-community acquisitions. Exempt persons and non-taxable entities below this threshold may opt to register in respect of such acquisitions if they so wish. It should be noted that exempt persons and non-taxable entities acquiring new means of transport must register for VAT irrespective of the value. It should be further noted that registration by exempt persons etc. for receipt of intra-community acquisitions does not give VAT deduction rights (see Chapter 6, also VAT Information Leaflet No. 13/01 on exempt persons and VAT Information Leaflet No. 11/01 on non-taxable entities). 7

18 Fourth Schedule services 2.6 Persons who receive from abroad for business purposes any of the taxable services mentioned in paragraph 4.8 of Chapter 4 (i.e. hiring or leasing of certain goods, advertising, consultancy, copyright, data processing, engineering and the provision of information, telecommunications services, the provision of staff and certain other services) are obliged to register for, and pay, VAT in respect of all such services, regardless of value. For VAT purposes, the recipient of such services is regarded as the supplier of the services to himself or herself. Traders should note that no threshold applies in these cases (see VAT Information Leaflet No. 9/01 for further details). Cultural, Artistic, Entertainment or similar services 2.7 Where a person not established in the State provides cultural, artistic, entertainment or similar services in the State, the promoter, agent or any person who receives such services for business purposes must account for VAT thereon by reverse charge. There is no turnover threshold for the receipt of these services (see also paragraph 4.7 of Chapter 4). A VAT Information Leaflet No. 3/02 is available. Option to register 2.8 A person whose turnover from supplies in the State or whose intra-community acquisitions do not exceed the appropriate thresholds may opt to become registered but only from a current date. The procedures for those opting for VAT registration are the same as those for traders who are obliged to register and a person who opts to become registered is subject to the same obligations as other registered traders (but see paragraph 2.9 of Chapter 2). Registration procedures 2.9 Every applicant for VAT registration must complete either a form STR, TR1 or TR2, each of which is available from the Taxes Central Registration Office (TCRO), Arus Brugha, 9/15 Upper O Connell St., Dublin 1, from the office of any inspector of taxes, or from the Revenue website at The application form must be completed, signed and returned to the TCRO or to the local inspector of taxes as appropriate. Registration is effective from the date on which the application for registration is processed, or from such earlier date as may be agreed between the Inspector and the applicant. In the case of a person not obliged to register but who is opting to do so, the effective date will be not earlier than the beginning of the taxable period during which the application is made. Any change in the particulars supplied by a trader for the purposes of registration (for example, a sole trader becoming a limited company or the cessation of a partnership) must be notified to the Inspector within 30 days of the change. Registration of new business 2.10 A person who is setting up a business but who has not yet commenced supplying taxable goods or services may register for VAT as soon as it is clear that he or she will become a taxable person. This will enable that person to obtain credit for VAT on purchases made before trading actually commences. In general, farmers are not obliged to register for VAT in respect of their farming activities. However special rules apply to farmers who, for example, supply bovine semen, agricultural 8

19 contracting services and who retail horticultural products. VAT Information Leaflets Nos. 12/01 and 24/01 are available. Cancellation of registration 2.11 A person who has opted to register for VAT may, subject to conditions which may include the repayment of any excess of VAT deductions over payments, cancel his or her registration by arrangement with the local inspector of taxes. Similarly, a person whose turnover has fallen below the appropriate turnover threshold may have the registration cancelled. A person ceasing to trade should notify the inspector of taxes of this fact in order that the VAT registration number may be cancelled promptly. This is important to note, otherwise return forms and demands for estimated VAT liability will continue to issue automatically. Revenue will also cancel a person s VAT registration if he or she has been registered in error, or he or she has ceased to be a taxable person. In certain circumstances where a person elects to register for VAT a cancellation of registration may give rise to recovery by Revenue of all or some of the net VAT repaid to the person during the period of election. Relief for stock-in-trade for newly registered traders 2.12 A person who has become liable for VAT may claim a credit, if any, for the stock-in-trade (i.e. goods for resale but not capital goods, tools etc.) held at the beginning of the first taxable period for which he or she is registered. Where the rates actually charged at the time of purchase of the goods differ from the rates applying at the time the relief is being sought the inspector of taxes should be consulted in relation to the amount to be reclaimed. No relief is available in respect of VAT on goods purchased prior to registration by a person supplying services. Group registration 2.13 Where Revenue are satisfied that it is in the interest of efficient administration and that no loss of VAT is involved, they may treat a group of persons established in the State, such as a number of companies which are closely bound by financial, economic and organisational links, as a single taxable person. An arrangement of this nature generally removes the necessity of issuing VAT invoices in respect of inter-group transactions (except in the case of certain property transactions). While one person or company in the group will be responsible for compliance with all VAT requirements for the whole group, including the lodgment of VAT returns/payments etc. with the Collector-General, each person or company in the group will be jointly and severally liable in the event that such compliance is not achieved. Any group wishing to adopt such an arrangement should apply to the local inspector of taxes. If, subsequent to the approval of a group registration, a new company is to be included in the group, permission for inclusion in the group registration must be obtained from the inspector of taxes. Who may not register in respect of supplies of goods or services? 2.14 A person carrying on exempt activities other than in the exceptional circumstances set out in paragraph 2.16 below and a person carrying on activities otherwise than in the course or furtherance of business may not register for VAT in respect of these activities. However, a person carrying on exempt activities may be required to register in respect of intra-community acquisitions of goods, Fourth Schedule services received from abroad and cultural, artistic, entertainment and similar services received from persons not established in the State (see 9

20 paragraphs 2.5, 2.6, and 2.7). There is no provision for deductibility of VAT on purchases of goods and services by such persons. Premises providers for mobile traders 2.15 Where a premises provider allows a mobile trader, not established in the State, to supply goods on the premises for a period of less than seven days, s/he must provide details to the local inspector of taxes, including the following information, not later than fourteen days before the trader intends to trade on the land: the name and address of the trader the dates on which the trader intends to trade on the premises providers land, and the address of the land If these details are not provided the premises provider may be made jointly and severally liable for the VAT due by that mobile trader. Waiver of exemption (short-term lettings) 2.15 The right to exemption from VAT in respect of rents received from the short-term ( i.e. less than 10 years) letting of land and buildings may be waived, apart from rents received in respect of developed property which has failed the economic value test. The effect of waiving exemption is that the person becomes a taxable person, i.e. he or she becomes liable for VAT on rents at the 21% rate but he or she has a right to a deduction for VAT paid on inputs. In general, the waiver must cover all such lettings which are made by that person. A landlord, for example, may not waive exemption in respect of some of the property and retain exemption in respect of other property. There is one exception to this general rule, in the case of the short-term letting of property which has been the subject of a surrender of a taxable lease. Waiver of the exemption will apply to that letting only. A person who wishes to waive exemption must apply to the local inspector of taxes. Such a waiver cannot normally be back-dated and will apply only from the taxable period in which application is made. However, in certain limited circumstances, application may be made to the inspector of taxes for such back-dating (see the Guide to VAT and Property Transactions, for further details). 10

21 Chapter 3 Supply of Goods This Chapter describes the various ways in which supplies of goods for VAT purposes are made, and outlines the VAT treatment appropriate to each type of supply. Taxable supplies of goods 3.1 A taxable supply of goods means the normal transfer of ownership of goods (including developed property) by one person to another and includes the supply of goods liable to VAT at the zero rate. It also means: (a) the transfer of ownership of goods by agreement, other than the transfer of ownership of goods to a finance company which are for supply in the course of a hire-purchase or credit sale agreement; (b) the sale of movable goods on a commission basis by an auctioneer or agent acting in his or her own name but on the instructions of another person; (c) the handing over of goods under a hire-purchase contract; (d) the handing over by a person to another person of immovable goods (property) which have been developed; (e) the seizure of goods by a sheriff or other person acting under statutory authority; (f) the application or appropriation by the taxable person of materials or goods to some private or exempt use; (g) the provision of electricity, gas and any form of power, heat, refrigeration or ventilation; (h) with some exceptions, the transfer of goods from a business in the State by a taxable person to the territory of another Member State for the purposes of the business (see Chapter 11). Self-supplies 3.2 The transactions referred to in paragraph 3.1(f) are called self-supplies. A self-supply of goods occurs when a taxable person diverts to private or exempt use goods in respect of which he or she is entitled to a VAT deduction. For example, if a jeweler diverts one of his or her watches from stock-in-trade to his or her own personal use, this is a self-supply. Also, if a builder uses building materials to build or repair his or her private house this again is a selfsupply. In both these examples the supplier becomes the final consumer and he or she must therefore suffer the VAT on those supplies, in the same way as every other final consumer does. Traders do this by accounting for VAT on the cost to themselves of the goods, exclusive of VAT. An example of a self-supply to an exempt business use is the diversion by a car dealer of part of his or her stock-in-trade for use in a taxi business. 11

22 Gifts Goods acquired VAT free as part of the purchase of a business do not escape the self-supply charge if they are subsequently diverted to private use or given away free of charge. 3.3 With some exceptions, gifts of taxable goods made in the course or furtherance of business are liable to VAT unless their cost to the donor, excluding VAT, is RUOHVV:KHUHJLIWVDUH taxable, the chargeable amount is their cost to the donor, excluding VAT. In the case of gifts costing more than H[FOXGLQJ9$7QRDOORZDQFHFDQEHPDGHIRUWKHDPRXQWEHORZZKLFK gifts are not taxable. Accordingly the person who makes a gift of goods costing H[FOXGLQJ VAT, has no liability, while the same person making a gift of goods costing H[FOXGLQJ VAT, must account for VAT on the full 7KHUDWHRI9$7GHSHQGVRQWKHJRRGVLQYROYHG Advertising goods and industrial samples 3.4 Advertising goods and industrial samples given free to customers in reasonable quantities, in a form not ordinarily available for sale to the public, are not taxable, even where the OLPLW is exceeded. Replacement goods 3.5 Replacement goods supplied free of charge in accordance with warranties or guarantees on the original goods are not taxable. Supply of goods and services in exchange for vouchers, tokens etc. 3.6 The sale of gift vouchers etc. (other than vouchers sold to and by intermediaries) is not liable to tax except where, and to the extent that, the amount charged exceeds the value shown on the voucher. The supply of goods or services in exchange for such vouchers, tokens etc. is liable at the rate appropriate to the goods or services supplied. Generally, the chargeable amount is the open market value of the goods or services supplied. Where vouchers and tokens having a face value are supplied at a discount to an intermediary with a view to their ultimate re-sale to private consumers, such tokens or vouchers become liable to VAT at the standard rate of 21 per cent at that time on the consideration received. VAT is also chargeable on the re-sale of the vouchers by the intermediary to the private customer. VAT does not arise when these vouchers are redeemed for goods. Traders must keep records in sufficient detail to distinguish between supplies of vouchers directly to consumers and supplies of vouchers to intermediaries. However, a different tax treatment arises in the case of discounted vouchers sold to a company which buys them in bulk to give them to staff as an incentive. Where a supplier of goods sells a voucher at a discount to a buyer, and promises to subsequently accept that voucher at its face value in full or part payment against goods purchased by a customer who was not the buyer of the voucher, then subject to conditions, the amount attributable to the voucher is the sum of money obtained by the supplier of the goods from the discounted sale of the voucher. The initial transaction involving the sale of the voucher is not a taxable transaction and VAT becomes chargeable only when the voucher is presented in exchange for goods. This relief is only permitted in cases where a proper audit trail is maintained by the trader to the satisfaction of his/her local inspector of taxes. Prepaid telephone cards 12

23 3.7 Prepaid telephone cards are not vouchers for VAT purposes, even when they have an amount stated on them. They are taxable at the time of sale (see VAT Information Leaflet No. 7/98 for further details). Payments received in advance deemed to be supplies 3.8 Where a payment on account or other payment, full or partial, is received by a taxable person before he or she has made or completed a supply of goods or services, a supply is deemed to have taken place at the time of receipt of the payment to the value of such payment. Services taxable as supplies of goods (the two-thirds rule) 3.9 A transaction which may appear to be a supply of a service is nevertheless taxable as a supply of goods if the value of the goods, that is their cost excluding VAT, to the service contractor used in carrying out the work exceeds two-thirds of the total charge, exclusive of VAT. For example, where the cost to the repairer of materials used in the repair of a washing machine is H[FOXVLYHRI9$7DQGWKHWRWDOFKDUJHIRUWKHUHSDLUZRUNLV WKH rate applicable to the materials applies, rather than the 13.5% rate which normally applies to repair services. It should be noted that the repair and maintenance of motor vehicles and agricultural machinery is not subject to the "two-thirds" rule. Auction and agency Sales 3.10 The sale of movable goods by agents or auctioneers who conclude agreements in their own name but on the instructions of, and for the account of, another person are treated as supplies of goods, at the appropriate rates, at the time that the agents or auctioneers make the sale. A detailed information leaflet is available on the VAT treatment of Auctioneers, and Auction and Agency Sales (VAT Information Leaflet No. 5/98). Property transactions 3.11 In general the supply of a long term interest in property (i.e. 10 years or more) is regarded as a supply of goods for VAT purposes. The supply of property does not attract liability to VAT unless all the conditions outlined in paragraph 17.8 of Chapter 17 are satisfied. See also the guide entitled VAT and Property Transactions. Chain of traders 3.12 Where there is a chain of buyers and sellers in any transaction and the goods which are the subject of the transaction are delivered by agreement directly by the first seller in the chain to the last buyer, each seller in the chain is deemed for the purposes of VAT to have made a supply of the goods to the next buyer. However, see paragraph 11.7 of Chapter 11 dealing with intra-community supplies. 13

24 Non-taxable supplies of goods 3.13 Liability to VAT does not arise where goods change ownership as security for a loan or debt or on the supply of repossessed goods by a hire-purchase company where the original customer was not entitled to deductibility on the goods in question, or where a business is transferred in whole or part from one taxable person to another. Goods supplied free of charge under warranty or guarantee are not liable to VAT but goods given away free of charge in other circumstances are, in general, taxable unless they are below LQ YDOXH VHH paragraph 3.3). 14

25 Chapter 4 Supply of Services This Chapter describes the various categories of services supplied for VAT purposes and outlines the VAT treatment appropriate to each type of supply. What is a service? 4.1 For VAT purposes a service is any commercial activity other than a supply of goods. Typical services include the services of caterers, mechanics, plumbers, accountants, solicitors, consultants etc. and the hiring or leasing of goods. The supply of digitised goods delivered online is regarded as the supply of a service for VAT purposes as is the physical supply of customised software. Services also include refraining from doing something and the granting or surrendering of a right. Contract work, that is the handing over by a contractor to a customer of movable goods made or assembled by him or her from goods entrusted to him or her by the customer, is also regarded as a service. Services taxable as supplies of goods (the two-thirds rule) 4.2 With the exception of contract work, a transaction which may appear to be the supply of a service is nevertheless taxable as a supply of goods if the VAT exclusive cost of the goods to the service contractor supplied in carrying out the work exceeds two-thirds of the VAT exclusive charge to the customer (see also paragraph 3.9 of Chapter 3). Agency services 4.3 Agents, other than agents selling movable goods who conclude agreements in their own name but on the instructions of and for the account of another person, are deemed to be supplying services and are obliged to register and account for VAT, generally at the 21% rate, in respect of their supplies of agency services subject to the WXUQRYHUOLPLWVHHDOVR paragraph 3.10 of Chapter 3 in relation to auction and agency sales). Travel agents, insurance agents, banking agents and certain related agents (see paragraphs (ix) and (xi) of Appendix A) are exempt from VAT. Place of supply of services - general rule 4.4 In order to avoid double taxation or non-taxation, the general rule in relation to the place of supply of services is that services are taxable at the place where the supplier has established his or her business. For most services there is little difficulty in determining the place of their supply. For example, the services of cinemas, restaurants, hairdressing salons etc. are supplied where the business is situated. Similarly, the place of supply of repair services is also the place where the repair is actually carried out. The exceptions to this rule are dealt with in paragraphs 4.5 to 4.11 below. Property (immovable goods) 4.5 The place where services connected with immovable goods are supplied is the place where the property is situated. Services supplied in connection with property situated outside the State are not therefore liable to Irish VAT. The services may, however, be liable to VAT in the other country. For example, the design of an office premises in the UK by an architect in the State is not liable to Irish VAT but may be liable to VAT in the UK. 15