Agriculture & Fishing

Farmers

VAT legislation provides special treatment of agriculture and fishery.

A farmer as defined, can elect to be accountable for VAT or may elect exclude his farming activities from the turnover thresholds and the obligations to register.  A farmer may claim the “flat rate addition”, even if he is not accountable for VAT.

A farmer is any person who is engaged in at least in one more farming activities as defined.  He must engage exclusively in agricultural production or services.  He must engage in at least one such activity and his supplies consist exclusively either or both of supplies of agricultural produce or agricultural services. His supplies may also consist exclusively of either or both such of supplies of agricultural produce or services and of one or more of the following:

• supply of machineries, plant and equipment has been used for the purpose of agricultural activities;
• supplies and services by way of horse training, where the total consideration is not likely to exceed €37,500 in a calendar year or any 12 months;
• or supplies of goods and services, other than those above where the total consideration does not exceed the designated limits.

Agriculture

Agriculture activities are divided into a number of categories;

• crop production; this includes general agriculture, growing of fruit, vegetables, flowers and ornamental plants, production of mushrooms, seeds, spices etc.
• stock farming together with cultivation; stock farming includes general stock farming, poultry, rabbit, beekeeping and snail farming;
• forestry
• fisheries; this include fresh-water fishing, fish farming, breeding of mussels and crustaceans.
• processing using means normally employed in an agricultural, fisheries or forestry, products deriving essentially from agricultural processing.

An agricultural service is any service specified, supplied by a farmer using his labour and those of employees or effected by plant, machinery or equipment, normally used for any of the above activities.  It includes

• field work, reaping, mowing, threshing, collecting, harvesting,
• storage of agricultural products,
• packing and preparation for market,
• hiring for agricultural purposes of machinery,
• technical assistance,
• destruction of weeds and pests,
• operation of irrigation and drainage equipment,
• tree felling and forestry services.

Farmers engaged in most farming activities and services do not need to register for VAT.

Intra-EU

Where farmers make intra Community acquisitions from other EU States over the relevant (inter EU acquisitions) thresholds, they are subject to normal rules.  They must register and account for VAT in respect of them.

Similar principles apply where farmers receive reverse charge services from businesses in other EU States. As is the case generally no threshold applies in respect of the receipt of services from other EU states and he would be obliged to self account for VAT on the acquisition of goods from other EU states.

Obligation to Register

The following categories of farmers must register, charge and account for VAT

• a farmer whose supplies of agricultural services, other than insemination, stock minding and rearing, exceed €37,500 in a 12 month period;
• a farmer whose turnover from supplies of bovine semen exceed €75,000 in a 12 month period
• a farmer whose turnover from the supply of garden centre stock of plants, shrubs etc. exceeds €75,000 in a 12 month period
• a farmer whose supply of agricultural services (except insemination services stock minding and stock rearing) services and retail horticultural supplies and bovine semen are likely to exceed €37,500 in a 12 months period;
• a farmer whose turnover from bovine semen, plants and shrubs is likely to exceed €75,000 in a 12 months period.

A  farmer not under the above categories may elect to register,  if he so wishes. VAT registered farmers have the normal obligations of accountable persons. The provisions that apply generally in respect of voluntary registration for VAT and subsequent deregistration apply. Therefore upon deregistration there may be a  liability to repay Revenue VAT reclaimedin respect of the previous three years.

VAT Rates

The VAT rate depends on the goods;

• wool 23%;
• live cattle and sheep 5.4%;
• milk, grass barley 0%;
• live poultry, Turkey 13.5%

The rate on agricultural services is 13.5%

Flat Rate Addition

Farmers who are not obliged to register for VAT or who do not elect to register, are referred to as “flat rate” famer.  A flat rate farmer is a farmer who

• is not accountable person,
• who is taxable only in respect on intra Community supplies (EU) or reverse charge services from other EU states or
• is registered in relation to horseracing, training only.

Flat rate farmers do not register for VAT. They may register the VAT in respect of intra-community acquisitions and receipt of services from abroad without having to charge VAT in respect of farming activities.

A flat rate farmer adds 5.4% (the flat rate addition)  when he sells to a VAT registered persons. The flat rate addition is paid to the farmer by the VAT registered buyer. The purpose of the addition is to offset VAT incurred on costs on inputs.  Once a farmer elects for VAT, or becomes compulsorily registrable for VAT,  the flat rate addition treatment no longer applies

The flat-rate addition was increased from 5% to 5.4% by Finance Act 2014.Finance act 2016 increased the farmers flat rate addition to 5.4 percent.

A flat rate farmer is entitled to recover VAT on construction of farm buildings and drainage works.  There is a special procedure for reclaiming these costs,  given that the farmer is not a  VAT registered.

Flat Rate Obligations & Invoicing

The farmer  is effectively entitled to add  the flat rate addition to its supplies to registered persons.  The registered persons are entitled to recover this sum, as if it was a VAT charge by way of input credit.

The  flat rate farmer treatment, is that the flat rate farmer is entitled, in effect, to recover some input  VAT costs.  This is an exception to the principle whereby an unregistered person may not recover VAT on inputs (purchases).

Flat rate farmers are obliged to issue a VAT invoice and show the sale together with the flat rate addition. The buyer may prepare the form of invoice. A VAT like  invoice must be issued showing the price of goods and particulars of the flat rate additions.  Normally the buyer prepares the invoice.  It includes  details normally set out in a VAT invoice.

The Finance Act 2016 provided for information to be set out in documentation to be provided with the flat rate addition including  invoices, vouchers,  credit notes and documents.

There is provision for a €4,000 euro penalty if a person issues a VAT document including a flat rate addition which is subject to restrictive order as above

Intra-EU

A business (VAT registered) buyer situate in another EU State must pay the flat rate addition.  It  may recover the VAT from the Irish Revenue. By way of simplification, there is a once off declaration scheme.  The farmer completes a formal witnessed declaration form, which is furnished to each buyer.  This facilitates payment of the flat rate addition.

A flat-rate farmer who makes distance sales in excess of an annual threshold to another Member State is obliged to register for and charge VAT in that other Member State. Under EU VAT arrangements, Member States are required to adopt a distance sales threshold of either €35,000 (or the equivalent in national currency) or €100,000 (or equivalent).

A farmer who has intra-community acquisitions is obliged to account for it in the normal manner.  Below the thresholds, he may opt to register for VAT in respect of intra-EU acquisitions.  A farmer may elect to limit his registration to intra-community (EU) acquisition.  In this case he is not entitled to a credit and must  account for VAT.

Regulations and Adaptation

Finance Act 2016 enabled the Minster for Finance to make an order to dis-apply the flat rate  addition in relation to certain agricultural supplies They are those in which Revenue following  a particular review of the sector and structures used together with the relationships of the parties and arrangements in the sector, determine that allowing the flat rate addition would result in systematic excess of additional payments over amounts of non-deductible VAT incurred in that sector.

Activities that are covered by any ministerial order pursuant to the above provision will not enjoy the flat rate additional regime. Persons including farmers affected by such an order may register for VAT and charged and recover VAT in the normal way. can do so.

Inland Fishing

Inland Fishing in inland waters may qualify as a farming activity. Sea fishermen who supply fish to VAT registered persons, where the fish are not processed beyond being gutted, salted or frozen and have been caught in the course of sea fishing business, are not obliged to register for VAT.  They may elect to do so.

They may sell plant and equipment used by them in the course of sea fishing business, without the obligation to VAT arising.  They may supply  goods and services where the turnover from them is below the general turnover limits, without having to register for VAT by reason of their fishing activities bringing them over the threshold.