Supply of Goods
VAT applies to the supply for monies or other value of goods or services by accountable persons within the State. The supple usually takes place when the ownership passes.
Taxable persons cover almost anyone in business. Accountable persons arethose who are or should be registered from VAT.
A distinction is made between the import of goods from outside the European Union and the acquisition of goods from within the European Union. VAT applies on imports (from outside the European Union) at the point of entry. This is the tax point. Postponed accounting is available for businesses since Brexit.
There are special treatment for acquisitions from other EU states. VAT registered businesses must generally self account for VAT on acquisitions of goods from other EU states.
Transfer of Ownership
The supply of goods generally involves the transfer of ownership of goods by agreement. Ownership includes the right to dispose of goods as owner.
Certain other transactions are deemed VATable even though they do not technically comprise a transfer of ownership. This includes
- hire purchase(but not the final transfer of ownership of ownership),
- credit sale transactions,
- transfers of goods within the EU without a change of ownership,
- processing of goods supplied by a customer
Time of Supply
That time of supply determines the VAT period in which liability arises. The general rule is that time of supply occurs at the point when ownership of the goods supplied, is transferred. The time of supply determines the rate of VAT applicable in accordance with the VAT legislation.
Under EU VAT legislation, the supply is made when the right to dispose of the “goods” passes. This principle applies to immovable goods; building and land. In this case, the interest usually passes on legal completion.
In the case of a service, the time of supply is the date the VAT invoice is issued, and if not issued, it is the date by which it should have been issued. The invoice must be issued 15 days after the end of the month in which the supply is made.
The due date for VAT is determined as follows. Where the invoice is required to be issued, it is the date on which the invoice is issued or the latest time by which it should have been issued. This is usually 15 days after the end of the month in which the supply is made.
When goods are paid for in advance, VAT legislation deems the supply to take place on the date when payment is made. An invoice should be issued in respect of an advance payment within 15 days of the end of the month in which it is receipted.
Special Time of Supply Rules
There are special rules as to the time of supply in particular cases.
- the transfer of ownership or taking of possession under a Compulsory Purchase Order;
- the handing over of goods under a financial arrangement, notwithstanding that title does not transfer until the last payment;
- the transfer of goods under which a commission is payable on sale;
- the handing over of goods under a hire purchase agreement;
- the application by a person for business purposes of movable goods which were developed, constructed, assembled, manufactured, produced, extracted, purchased, imported or otherwise acquired by him or her or by another person on his or her behalf, except where tax chargeable in relation to the application would, if it were charged be deductable,
Self-supplies happen at the moment of appropriation to a non-VATable use from a VATable use. This may involve physical removal of stock or other appropriation to private use.
Transfer of goods by a trader from a business inside the State to one outside the State involves a disposal at that point in time.
A transfer is in connection with security, redemption of security, transfers of business, transfers of goods at the end of a hire purchase contract are not regarded as supplies.
In the case of real property, the supply takes place from the transfer of the right to disposal takes place. This is generally the date of completion of the contract.
In the case of continuous supplies of services, and the supply of telecommunication, electricity and gas, to consumers /unregistered persons, the liability arises when the statement of account issues. There are special rules in respect of such supplies to businesses.
VAT is charged on the total consideration, which the taxable person supplying the goods is entitled to receive. This includes taxes, commission and costs, but excludes VAT on those items.
Where prices are in a foreign currency, monies are converted into euro at the exchange rate last recorded by the Central Bank at the time the tax becomes due. Other methods for valuing the exchange rate may be agreed with the Revenue from time to time, where appropriate.
VAT must be charged on incidental expenses which are charged to the person to whom the goods and services are supplied. Expenses directly incurred on behalf of the person to whom the supply is made, which are simply reimbursed, are not subject to VAT.
The consideration need not be received from the purchaser only. If payments are made by a third-party such as by way of a subsidy which is linked to the sale, this will form part of a consideration.
In the case of acquisitions from inside the EU, VAT is charged on the total consideration paid in the same manner as the above.
Where the consideration is partly in money and partly in kind, open market value is imposed. The Revenue may substitute market value for transactions between connected persons or where the buyer is not entitled to a full deduction or is a flat rate farmer.
If the seller is overpaid in error, VAT is charged on the amount received.Where prices are reduced because of early payment discounts, the VAT may be later refunded or credited.
Where VAT is charged but the sums are not paid and are later written off as bad debts, VAT may be reclaimed, subject to conditions. In order to claim bad debt relief, it must be shown that all reasonable steps have been taken to recover the debt. It must be allowable as a deduction for income tax in accordance accounting practice and written off from the financial accounts. They debt must not be with a connected person.
Where a person appropriates goods from stock or diverts it to a non-VATable use, there is a self-supply. In this case, VAT is charged on the basis of the cost.
In the case of excisable goods, VAT is charged on the full cost of the goods at the point of exit from the warehouse, including the excise duty.
In the case of a reverse charge service provided from abroad, VAT is charged on the cost of the service to the domestic recipient.
Where a contract involves the supply of goods and services other than food, the consideration may be deemed to refer to the goods. The appropriate VAT rate in respect of the goods applies, if the cost of the goods is more than two-thirds of the total price.
Vouchers and Gifts
In the case of tokens and vouchers, VAT does not arise provided that the charge does not exceed its face value. In the latter case, VAT is payable on the excess. A VATable sale may arise when the voucher is used.
Trader who supply stamps, tokens or coupons to persons who intend to resell them, the supply to the intermediary is subject to VAT at 23%, relative to the face value. A supply by the trader is subject to VAT at 23%. Their redemption is not subject to VAT.
Where a voucher has a face value and is sold for less, the amount on which VAT is accounted for, is the amount actually received irrespective of the face value.
Where a business disposes of items free of charge, then it must account for VAT on the cost of the goods supplied. Where he has claimed input credit on VAT incurred, this has the effect of denying a deduction of input credit in respect of the goods concerned.
See the separate chapter about the 2019 revisions to the treatment of vouchers.
Formerly, there was a so-called cocktail or package rule, which applied where there was a supply of mixed package of goods and services for a single price, made up of goods charged to VAT at different rates.
The new rules distinguish between ancillary, composite, multiple and principal supplies. See the separate section in relation to these categories. An individual supply is supply of goods which is a constituent part of a multiple supply and which is physically and economically dissociable from the other goods and services forming part of that supply and is capable of being supplied as a good and service in its own right.
A multiple supply is two or more individual supplies, made in conjunction with each other where the total consideration covers all individual supplies. A composite supply is a supply comprising two more supplies of goods and service or any combination of these. supplied in conjunction with each other, one of which is a principal supply.
A principal supply is a supply of goods or services which constitute the predominant element of a composite supply, and in relation to hic which any other supply forming part of the composite supply, is ancillary. An ancillary supply is a supply forming part of a composite supply which is not physically and economically dissociable from the principal supply and is capable of being supplied only in the context of the better enjoyment of that principal supply.