A taxable person is one who otherwise than as an employee of another engages in the supply within the State of taxable goods or services in the course of furtherance of the business.
A business is very widely defined. It is an economic activity, whatever the purpose or result of that activity. It includes any activity of producers, traders or persons supplying services including mining and agricultural activities and activities of a profession and the exploitation of tangible or intangible properties for the purpose of obtaining income therefrom on a continuing basis.
The VAT legislation requires taxable persons who are ‘accountable persons’ to register for value added tax. With certain exclusions, taxable persons are defined to be accountable persons. Taxable persons (i.e., businesses) whose turnover is less than the relevant annual thresholds can usually elect to register for VAT. Taxable persons whose turnover is likely to exceed the annual thresholds must register for VAT.
Partners and Agents
Partners are persons in business in common with a view to a profit. Although partnerships do not constitute separate legal entities, the Revenue will permit a single partnership registration separate from that of the individual partners. This registration will apply to supplies by the partnership. The registration will continue so long as there is a common continuing partner before and after each change in the partnership composition.
Intermediaries and agents may be obliged to register for VAT. A liquidator or receiver appointed to the assets of a company or under a fixed charge will generally have to register for VAT in respect of sales in the course of their duties. An agent who supplies goods on behalf of another may be obliged to register and charge VAT on sales if he appears to be the supplier. In this event he will further charge VAT to his principal, the person who has appointed him as agent.
If an agent such as a commission agent is disclosed, then the sale will generally be with the principal. In this event, the agent would only be liable to account for VAT on the service provided i.e. the commission.
Groups of companies may be dealt with as a single entity for VAT purposes. They must apply to the Revenue Commissioners for recognition as a VAT group. The rules in respect of VAT groups are not as rigid, as in relation to income and corporation tax. If there are close economic, financial and organisational links, this may suffice.
Groups under common control, whereby one member has more than 50% of the voting rights of each will generally qualify. The Revenue must be satisfied that it is expedient for the efficient administration of tax, that they be treated as groups. Qualification for the registration is not automatic. The Revenue may cancel the registration on a number of discretionary grounds.
Where a group is registered one member of the group is called a remitter. The remitter makes the VAT return. Each member of the VAT group is jointly and severally liable for all of the VAT obligations. This means that each and any of them may be pursued by the Revenue for the full amount due.
Broadly speaking, transactions between members of the VAT group are not subject to VAT. There is no requirement to raise invoices nor to account for VAT. There are exceptions in respect of property transactions. There are also implications where business assets are transferred within a group.
The general turnover limits apply to the VAT group. Certain statistical returns in respect of supplies within the EU must be returned separately. The remitter may return these on behalf of each member of the group.
The turnover thresholds for mandatory registration are as follows
- for businesses which supply services only €37,500 per annum
- for businesses which supply goods €75,000
- for businesses supplying goods and services where 90% or more of the turnover is attributable to goods €75,000
- for businesses supplying goods and services in other cases €37,500
- for non-established businesses, there is no threshold
This means that for most businesses business (whether a sole trader, partnership or company) is required to register for VAT if its turnover (sales) exceeds specified limits. The obligation to register applies where the turnover thresholds are likely to be exceeded in any 12 month period. Even if these turnovers are not exceeded, the business may elect to register for VAT.
The threshold is counted net of VAT in respect of goods purchased for sale. If the trader is likely to exceed the threshold in the 12 month period is obliged to register.
There are rules which prevent persons or associated persons from avoiding the obligation to register by splitting a business of the same type between one or more companies or other entities under common control or in partnership. If, in substance, a group of companies or companies under common control of a private individual or partners are undertaking the same activity, then their aggregate annual turnover will be looked at as a whole, to determine whether they exceed the registration thresholds.
Certain goods and services are wholly exempt from VAT. Businesses providing such services, need not register.
Election to register
Businesses whose turnover is below the threshold may elect to register. This will enable them recover VAT on their purchases. They will be obliged to charge VAT on their sales. This may not be a consideration where most or all of their sales are exempt or zero rated such as where their goods are exported or where there customers can recover VAT.
If the business does not exceed the mandatory registration threshold, it may apply to cancel registration. This applies from the end of the following period. It must provide details of VAT paid and reclaimed in the previous three years and pay any excess of VAT reclaimed over VAT paid by to the Revenue Commissioners in that period.
The Revenue Commissioners may cancel a registration number assigned to a Vatable trader when that person ceases to become or ceases to be an accountable person. Where a VAT number has been cancelled, the Revenue may inform the entity’s suppliers. They may also publish details of a cancelled VAT number, date of cancellation and name and address of the person who held it.
Certain business must register for VAT, even if they do not exceed the thresholds. If a person or business issues a VAT invoice while unregistered, he or it is obliged to register and account to the Revenue for the VAT.
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.
Registration for VAT is usually undertaken as part of the general registration for taxes when a business commences. It may be undertaken separately, where the business is already registered for other taxes. The application is made to the business’ tax district.
Revenue will not readily permit businesses to register unless they furnish evidence that they are trading (or are about to undertake another registrable activity)or have a very definite intention to do so in the immediate future. Revenue is mindful of the possibility of fraudulent reclaims of VAT.
The relevant forms TR1 for individuals, and TR2 for companies, are available online. Form TR2 (FT) applies to foreign companies.
The forms are now required to be completed electronically other than in exceptional circumstances… Registration must take place within 30 days of the obligation to register arising. Where turnover falls below the thresholds it may be possible to deregister subject to certain conditions.
The Revenue Commissioners maintain a register of businesses which are accountable persons. Each is assigned a VAT registration number.
Registration will generally commence at the start of the following VAT period. Registration may be backdated to the commencement of the VAT period concerned on the application. VAT on expenses may not be reclaimed where they were incurred prior to the date of registration.
Businesses with no Irish establishment in the State, who supplies goods or services within the State must register for VAT irrespective of their turnover thresholds. Therefore, an unestablished trader must register if the place of supply of any of his /its goods or services is within Ireland.
They do not enjoy the thresholds in respect of goods and services supplied. They do enjoy the intra-EU acquisition threshold. They may be obliged if they subsequently make supplies of the goods in the state to register for VAT in the state. They may be able to avail of consignment relief to avoid liability for supplies in the state. See the separate sections.
In some cases the business recipient self accounts and the supplier need not register. Where the supply is to a non-VAT registered business or a consumer this is not possible. For example, where goods are installed are assembled in the state by non-established businesses the business recipient is obliged to self-account for VAT.
Businesses, local authorities Department of State and bodies established by law must register (if not already registered) and self-account when goods are installed are assembled for them by a non-established business.
EU Goods Purchases
A business which acquires goods from other EU states is obliged to register at a lower annual threshold, than for supplies (€41,000). Where a business exceeds the threshold for EU acquisitions or is likely to do so within a 12 month period, then it must register for VAT.. It accounts for VAT on the “reverse charge” basis (self-account) on goods acquired from other EU states. This is referred to as an intra-EU or intra-community acquisition.
This registration obligation is subject to the same rules preventing artificial division of businesses under common control for the purpose of avoidance of the threshold. The turnover of the connected entities and entities under common control undertaking the same type of business are aggregated for the purpose of calculating the threshold.
The obligation to register applies to some businesses which would not otherwise be obliged to register for VAT. Businesses which make exempt supplies, local authorities’ farmers and fishermen (who enjoys special regimes must register where they exceed the threshold. They may suffer the VAT as they may not otherwise be entitled to recover it.
Where a trader which is below the general threshold for registration for VAT on the supply of goods and services registers on account of intra-EU acquisitions then it must charge VAT on its sales and supplies. In contrast to an exempt trader, it will then be able to recover the VAT on the intra-EU acquisition.
A trader that does not have the requisite turnover may elect to register for VAT on intra-EU acquisitions. As with the principal threshold, a business may deregister if it appears likely that will not exceed the threshold for intra EU acquisitions in the following year.
The mechanism effectively ensures that VAT is paid in respect of supplies by businesses in other EU countries in the same way as that would be payable for domestic purchases. Exempt businesses et cetera would not be to cover recover such VAT.
Services from Abroad
A business which receives services from a provider established outside Ireland (not just European Union) must self-account for VAT on those services. There is no turnover threshold.
A business in receipt of such services must register for VAT and account for it. There is a deemed supply in the State. The foreign provider can generally zero rate apply in its home state on the basis that the place of supply is in the recipient state.
Any business which receives services from abroad must register for and account for VAT on the reverse charge basis on those services. The business may be obliged to charge VAT on all of his activities (other than exempt activities) unless they qualify for ring fencing.
Businesses below the threshold for registration, businesses making exempt supplies, local authorities and flat rate farmers must register for VAT upon receipt of a service from a provider based abroad. Any entity involved in a business is subject to the obligation.
In the same way as for goods, whether or not the recipient can recover the VAT is dependent on whether it is for a business subject to VAT. Therefore, providers of exempt services such as financial services effectively suffer the VAT. This equalizes the position relative to purchase from within the State.
Place of Supply
The general rule for goods, to which there are many exceptions is that they are supplied where ownership of them passes. There is a special consignment stock relief available for EU suppliers. This allows nonregistered suppliers to sell goods within the state from stocks held by third parties within the state without triggering an obligation to register for Irish VAT. Conditions apply.
The rules in respect of services are more complex. It is more likely that a business will be deemed to provide services in the State when they are provided to private persons/consumers. Business recipients of services from abroad are obliged to self-account for VAT on the services notwithstanding that they take place in the State.
There are some instances where the place of supply is the State, but the non-established business does not need to register and charge VAT. In the case of goods acquired from other EU states, the recipient must self-account on the acquisition. In this case the acquisition is in the State, but it is not made by the non-established business.
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