Supply of Goods or Services
VAT legislation makes the supplier liable to charge, collect, report and pay VAT. The supplier is usually the seller. However in many cases, in particular the international supply of goods and services, it is the recipient who is deemed the supplier. This is called a reverse charge.
VAT is chargeable when the supply takes place in the state. This can be an artificial concept. Legislation deems the place of supply to be in a particular place in certain cases which may seem contrary to the everyday sense of the words.
Because value-added tax is relatively harmonised internationally, in most cases the legislation of two or more states connected with the transaction will each deem the place of supply to be in a particular state. This reduces the possibility that VAT might be simultaneously chargeable in two states in relation to a single transaction.
A taxable person for VAT purposes is one who acts in the course of a business. The VAT directive refers to a person who independently carries out in any place any economic activity whatever the purpose or results of that activity The Irish legislation refers to a person who independently carries on a business. Business is defined broadly to include any economic activity. Activities as an employee are excluded; there is no independent business.
The Irish legislation distinguishes between an accountable person and a taxable person. An accountable person is one who is obliged to charge collect and account for VAT to Revenue. Not all taxable persons are accountable persons and not all accountable persons are taxable persons.
A taxable person who engages in the supply within the State of taxable goods or services is generally deemed an accountable person. Certain additional categories of person are deemed accountable, including purchasers of goods from EU states and recipients of services from outside the State. There are also other circumstances where recipients are deemed to be accountable purposes for pragmatic tax collection reasons.
Certain categories of persons are not deemed to be accountable persons in particular, in cases where the recipient is deemed the taxable person. The most important exclusion applies to traders whose turnover does not exceed a certain level. the turnover is considered on an annual basis. Persons whose turnover is below the relevant level may choose to be VAT registered in which event they may recover VAT on their purchases but must charge VAT on their sales.
Where persons cease to qualify for exemption such as where the annual turnover thresholds exceed the relevant levels, they are deemed to be an accountable person from the commencement of the following taxable (two months) period. They should register for VAT.
The trader should register as soon as it appears likely that the threshold will be exceeded in the annual period. The application for registration for VAT is made in a prescribed form. It can be backdated to the initial day of the(two monthly) period concerned.
A business that is not established in the State (no base or residence in the State) is subject to Irish VAT if it makes any taxable supply in the State. This may apply where the goods are in the State at the time of sale. In the case of a non-established trader there is no turnover threshold.
In the case of distance sales, the goods are not in the State at the time of sale. They cross the border from one EU state to another as part of the sale.. In the case of distance sales, a non-established trader must register for Irish VAT if it exceeds the threshold for distance sales in the State. See the provisions on the One Stop Shop applicable since June 2021.
There is relief for the sale of consignment stock held by a non-established (but EU established)business in the State. Where the stock is sold to a business customer from the stock, the (Irish base), the customer self-accounts for VAT and it is treated in the same way as an intra-community sale where the goods move directly from the supplier in one state to the buyer in the other state.
This EU simplification avoids the supplier in the other EU state having to register in Ireland (where the consignment stock is held.) The entity holding the stock must be independent as otherwise, it may constitute a branch or establishment of the supplier.
A person who acquires goods from the EU from a business in another makes an intra-community acquisition of the goods. This is a sale where the goods move from one EU state to another. unless the value of acquisitions (purchases from other EU states) annually is less than and is likely to be less than €41,000 in the year the person so acquiring the goods has to register for VAT.
If the value of acquisitions are below €41,000 annually the supplier in the other EU state charges its home state VAT to the Irish trader VAT.
EU businesses that do not have an establishment (i.e. a base in Ireland) have the benefit of the €41,000 threshold. Intra-community acquisitions (purchases from other EU states) up to this level do not require the business to self-account. VAT would usually be charged in the state of the supplier.
Public bodies which acquire goods from other EU states are deemed to have done so in the course of a business. Therefore there are obliged to register for VAT and self-account for it on acquisitions of goods from other EU states where they exceed the €41,000 threshold in a 12 month period.
There are special provisions applicable to VAT for supplies made by farmers and fishermen. They may elect for a form of treatment that allows VAT recovery on purchases to a certain extent. They are nonetheless obliged to register for VAT if their intra-EU acquisitions exceed €41,000.
The obligation to register applies in this case even if the person concerned is not otherwise making supplies of goods subject to VAT. For example they may be undertaking a business which is not subject to VAT on its sales at all. This may mean that such a person has to account for VAT on the purchase without any deduction or set off against VAT on sales. They will not be able to recover the VAT.
Acquiring a Vehicle
Where a private person acquires a new means of transport (such as a vehicle) he must register in respect of a one off transaction.
A person who acquires a new means of transport from another EU state is liable for VAT and must register. Accordingly a person purchasing and importing a car must register and self- account for VAT. This VAT registration and accounting is specific to the transaction.
Traders must register in respect of the import of excisable products, irrespective of whether the turnover threshold for EU imports is exceeded.
Fixtures and Installations
Goods which are installed or assembled in the State are deemed to be supplied in Ireland. If the work is done for a non-taxable person e.g. a consumer buyer, a business based outside Ireland it must register in the State and charge Irish VAT. Where the goods are supplied to a business, that business recipient self-accounts for VAT. Where the supplier is established in Ireland it will charge VAT in the normal way.
Where the goods become fixtures, the place of supply is deemed to be where the property concerned is situated. The supplier is generally obliged to register for and charge VAT in that place (Ireland, where the property is in Ireland). The customer self-accounts where the supply is subject to the special withholding tax arrangements applicable in certain sectors including particular construction (relevant contract tax).
Where a VAT registered business purchases or acquires a service from abroad (whether within the European Union or elsewhere) its self- accounts for value-added tax on the service received. As with self-accounting generally, this means that the purchase is treated as if it was a sale for the purposes of the VAT return. VAT is accounted for on it.
Where a business recovers VAT on all of its purchases then it may offset the VAT. This means that no net VAT will be payable.
In contrast where a business is not subject to VAT on its sales (e.g. financial services sector)it will effectively suffer the VAT. This equalises the position as it would equally be unable to recover VAT on an equivalent domestic acquisition of the service.
There is no turnover threshold on services acquired from abroad. Therefore where a trader which is not VAT registered purchases a service from abroad, it is required to register for VAT and self-account. It will suffer VAT in the same way as if they have purchased domestically. This registration will then apply to their sales and acquisitions of goods from other EU states.
Special Place of Supply Rules
There are exceptions to the general B2B cross-border services VAT treatment by which the purchaser self-accounts. In these cases the place of supply is deemed to be where the recipient is established.
There are other cases where the supply is deemed to take place in a particular place/ state due to the nature of the supply. In some such cases the recipient of the service still self-accounts. In other cases the provider of the service is required to register in that state and charge VAT to the service recipient
Where the supply of services (and ancillary services) relates to an admission to a cultural, artistic, sporting, scientific, educational, entertainment or similar activity the place of supply is where the event takes place.
Where a person is a principal contractor receiving certain construction services it is deemed to be accountable for VAT. This applies to contractor under relevant contract tax. See the separate section and relevant contract tax. It applies to certain principal contractor in the construction and other industries.
The recipient self-accounts for VAT on the service received. The special rule on the apportionment of goods and services does not apply where the reverse charge obligation applies. A special reverse charge invoice must be provided.
Similar provisions apply to receipts of scrap metal from persons carrying on business in the State. Once again the recipient must self-account on the receipt.
There are special rules for construction services. These apply in tandem with relevant contract tax. The purpose is to put the onus of tax collection on the recipient of the service (the construction industry contractor as opposed to the subcontractor) instead of the supplier would normally be obliged to account for VAT.
Where a person receives subcontract services for the purpose of erection of buildings or development of land or the manufacture and treatment of materials for use in construction operations, then the principal contractor must account for VAT. Construction operations are defined as including constructional repair, alteration, extension of buildings or structures as well as a range of other infrastructure such as roads, power lines, telecommunications, waterways, sewers.
Also covered by the above rules are the installation of services in buildings such as air-conditioning ventilation water supply, sanitation, installation of telecommunications system. It includes external cleaning of buildings (other than normal maintenance) or internal cleaning carried out in the course of construction, alteration, extension repair or restoration. It also includes operations integral or preparatory to any of the above, including site clearance, excavation, tunneling, foundations, landscaping, site restoration.
A person providing premises to a business which is not established in the State must report certain information to Revenue. If they fail to do so they become jointly liable with the relevant promoter or business in respect of VAT due on their sales.
Where the person providing the premises permits a trader who is not established in the State to supply goods for a period of less than 28 consecutive days certain particulars of the trader provided to Revenue, not less than 14 days before the commencement of trade.
Where premises is provided to a promoter not established in the State in relation to services comprising admission and ancillary services in relation to a cultural artistic entertainment or a similar event, it is deemed to be supplied in the State. Similar information must be furnished by the provider of the premises. If it fails to do so the provider of the premises may be made jointly liable for value-added tax on the services and goods supplied.
In the case of dances on a premises licensed for the sale of intoxicating liquor the owner of the premises or the licence holder is deemed accountable for value-added tax on the services provided. Dances include all functions which include dancing and are open to the public on payment of an admission charge.
Public bodies including in particular states, regional and local government authorities bodies governed by public law are not deemed to engage in economic activity merely because they collect fees and payments in connection with the activities. However they may be deemed to be taxable persons where it would otherwise lead to a distortion of competition to fail to require them subject to value-added tax.
Public bodies may be subject to VAT in relation to certain categories of activities such as, for example, the supply of utilities transport of goods and passengers and certain services.
In principle bodies that are not for profit may nonetheless be subject to VAT under the general definition of taxable person. There are a number of exemptions which may benefit such entities.
- The supply of services by an independent group of persons (being a group that is an independent entity established for the purpose of administrative convenience by persons whose activities are exempt from, or are not subject to, tax) for the purpose of rendering to its members the services directly necessary to enable them to carry out their activities, but only if the group recovers from its members the exact amount of each member’s share of the joint expenses.
- The supply of goods and services closely related to welfare and social security by non-profit making organisations
- The supply of services and of the goods closely related thereto for the benefit of their members by non-profit making organisations whose aims are primarily of a political, trade union, religious, patriotic, philosophical, philanthropic or civic nature where such supply is made without payment other than the payment of any membership subscription
- The provision by non-profit making organisations of facilities for participation in sporting activities, including golf, or physical education activities, or services closely related to the provision of those facilities.
- The supply of cultural services, and of the goods closely linked to those services, by a public body orany cultural body that is recognised as such a body by the Revenue Commissioners
An agent is a person who acts on behalf of another. An agent may be disclosed so that it is clear that it is acting on behalf of the named principal. An undisclosed agent acts as agent but does not disclose the identity or otherwise of the of his or her principal or the fact of the agency at all.
With a disclosed agent the transaction is between the principal and the buyer recipient of the service. The agency services are services provided to the principal. The principal invoices the buyer/service recipient for the value of goods and services provided. The agent invoices the principal for the value of the services e.g. commission services.
An undisclosed agent is deemed to be the supplier or recipient of the services as the case may be. There is deemed to be a simultaneous supply to and by the agent . .Therefore in the sale of goods they will be deemed to be supplied by the principal to the agent and by the agent to the customer. Each raises a VAT invoice to the other. The agent transaction is deemed to have the place of supply and the rate of the principle transaction.
Where goods are disposed of by the liquidator or receiver, or they carry on trade using the assets concerned they are obliged to register and account for VAT. This ensures that VAT applies on the liquidator’s and receiver’s trade and on the disposal of asset in the insolvency is paid and is not subject to abatement in insolvency.
Prior to the Finance Act 2013 the borrower in respect of whom a receiver had been appointed over assets was the accountable person. The receiver is now liable to register and make returns remitting VAT due. In strict terms, this applies to the sale of goods and not supply of services. Finance Act 2013 extends the provision to supply of service.
The obligation is on the receiver to file and pay the tax remains. The liquidator is obliged to repay sums due under the capital goods scheme adjustment. This is deemed a necessary disbursement out of income.