Ireland Fact-File Part 2:
Individual Business Domestic Taxation
2.10 Ireland Value Added Tax (VAT)
Value Added Tax
VAT applies to the majority of goods and services provided by small businesses (whether sole traders, partnerships or limited companies), although below the VAT registration thresholds, there is no obligation to register for VAT.
For resident businesses, the registration threshold is EUR75,000 if goods are supplied, or EUR37,500 if only services, or a mixture of goods and services are supplied.
For non-resident business owners, a EUR35,000 threshold applies
if ‘distance selling' to individuals in Ireland is taking
place above that amount.
However, foreign operations with no fixed place of business in Ireland but which are supplying goods and services within the Republic must usually register for VAT purposes regardless of turnover.
There is no distinction made in terms of determining VAT liability between the different types of individual business; the type of good or service being supplied, in conjunction with the turnover threshold, are the determining factors.
Updated in December 2010
The standard VAT rate is 21% (down from
21.5% prior to January 2010), with reduced rates of 13.5%
applying to certain construction and hospitality industry
services, gas, electricity, and newly built houses, and 4.8%
to livestock. In the austerity budget delivered in December
2010, it was announced that the standard rate would be increasing
to 22% in 2013, and 23% in 2014.
Transport services, exports, children's clothing and certain food products are zero-rated, and education, welfare and cultural services are VAT exempted, as are financial services, and medical goods and services.
Where a principal contractor and subcontractor are within
the scope of Relevant Contracts Tax (RCT), from September
2008, with regard to VAT the reverse charge mechanism will
apply, meaning that the principal must account for the VAT.
The EU VAT directives
As Ireland is a member of the European Union, it is subject
to European VAT legislation, as defined under the Sixth VAT
Directive (2006/112/EC), and therefore, VAT-registered individual
businesses operating from the Republic will be subject to
the VAT directive, to the degree that the Irish authorities
are bound by it in putting in place standard and reduced rates
within the permitted range, and setting the national rules
regarding when and how VAT should be charged by registered
businesses and individuals.
In addition, individuals or their businesses undertaking imports in excess of EUR191,000 per year, or exporting more than EUR635,000 in taxable goods (but not services, as they are excluded) will be obliged to make declarations for Intrastat purposes. Intrastat has been put in place to collect data on trade in goods between EU member states.
Under new rules coming into force between 2010 and 2015 (with changes relating to telecoms, broadcasting and electronic services delayed until January 1, 2015) , business to business (B2B) supplies of services will be subject to VAT in the country in which the consumer is located, rather than the supplier's country of residence, with the business consumer required to account for VAT using the reverse charge mechanism (whereby they act as both the supplier and the consumer, charging themselves the VAT where appropriate, and then claiming it back).
For business to private consumer (B2C) supplies of services, the place of taxation with regard to VAT will remain as the supplier's location.
There will, however, be certain exceptions, where the general rules do not apply, and specific rules will be in place, to reflect that the place of taxation should be where the service is consumed. Exempted areas will include: the electronic supply of services, telecommunications and broadcasting, certain catering and hospitality services, scientific and educational supplies, and cultural and sporting services and supplies.
The new rules have effectively removed the advantage of locating
in an EU jurisdiction with a low VAT rate, such as Luxembourg
or Madeira.
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