Charge to tax

Value added tax (VAT) is charged (s 2) on:

(a) the supply of goods, and

(b) the supply of services,

by a taxable person within the State for consideration in the course or furtherance of business carried on by him.

VAT is also charged on goods imported to the State from outside the EU.

From 1 January 1993, VAT is charged on EU imports (i.e. intra-Community acquisitions of goods):

(a) movable goods (other than new cars, boats, or planes) acquired by a taxable person (s 1) from a person who is registered, or ought to be registered, for VAT in another EU State, and

(b) new cars, boats and planes (new means of transport) acquired by any person from a person in another EU State.

Supply of goods

Meaning of supply of goods

The supply of goods means:

(a) The transfer of ownership of goods by agreement.

(b) The handing over of goods under a hire purchase type agreement.

(c) The handing over to a person by a property developer of land or buildings which he has developed on behalf of that person.

(d) The compulsory purchase of goods by or on behalf of the State or a local authority.

The seizure of goods by a person acting under statutory authority.

(e) The application of goods from a taxable to an exempted activity, i.e., a self-supply to an exempted activity.

(f) The appropriation of business goods to non-business use, i.e., a self-supply to non-business use.

(g) The transfer of goods for business purposes from a business in the State to a branch of the business in another EU State.

The following are not regarded as supplies of goods:

(i) The transfer of ownership of goods from a borrower to a lender as security for a loan or debt.

(ii) The transfer of ownership of goods from the lender back to the borrower on redemption of the loan.

(iii) The transfer of ownership of goods in connection with the transfer of a business or part of a business to another taxable person.

Place of supply of goods

The general rule is that a supply of goods takes place where the goods are located at the time of the supply (s 3(6)(c))).

The exceptions to the general rule are:

(a) An EU import of goods other than a new boat, plane or vehicle is treated as supplied where the goods’ journey ends. If the customer is registered for VAT, it is treated as supplied in the EU State that issued the customer’s VAT number.

An EU import of a new boat, plane or vehicle is treated as supplied in the EU State where the goods’ journey ends (s 3A(1)).

(b) Goods that are assembled or installed are treated as supplied where assembled or installed (s 3(6)(b))).

(c) Goods supplied on board a boat, plane or train travelling between EU States are treated as supplied in the EU State of departure (s 3(6)(cc))).

(d) Goods sold by distance sellers are treated as supplied where the goods’ journey ends (s 3(6)(d))).

Supply of services

Meaning of supply of services

A supply of a service is “the performance or omission of any act, or the toleration of any situation” other than a supply of goods.

Place of supply of services

The general rule is that a supply of services takes place where the supplier has his establishment. If he has several establishments, it takes place at the establishment most concerned with the supply; if he has no establishment, it takes place at his usual place of residence (s 5(5))).

The exceptions to the general rule are:

(a) A service connected with land and buildings is treated as supplied where the land and buildings are located (s 5(6)(a))).

(b) A cultural, artistic, sporting, scientific, educational or entertainment services is treated as supplied where physically performed (s 5(6)(c)(i))).

(c) A service consisting of valuation of movable goods is treated as supplied where physically performed (s 5(6)(c)(iii))).

(d) A service consisting of work on movable goods is treated as supplied where physically performed (s 5(6)(c)(iv))).

(e) The Fourth Schedule services are: advertising, banking, copyright, data processing, consultancy, provision of staff, and undertaking not to engage in business.

Such a service, if received for private purposes by a non-EU resident, is treated as supplied where the recipient is resident.

If received for business purposes, it is generally treated as supplied where the recipient is has his establishment. This is known as the “reverse charge” mechanism.

If received for private purposes by an EU resident, other than in circumstances where the recipient held himself out to be taxable in respect of the supply, it is taxed according to the general rule, i.e., where the supplier has his business establishment (s 5(6)(e))).

(f) The hire of goods (other than means of transport) by an EU-based supplier is also taxed on a reverse charge basis - see (e) above.

The hire of means of transport by an EU-based supplier is subject to the general rule, i.e., such a service is treated as supplied where the supplier is established.

(g) The hire of movable goods by a non-EU-based supplier is treated as supplied where the goods are used (s 5(6)(d))).

(h) A goods transport service is, in general, treated as supplied where the transport takes place (s 5(6)(b))).

An intra-EU goods transport service is treated as supplied in the EU State of departure, but if the customer is registered for VAT, it is treated as supplied in the EU State that issued the customer’s VAT number (s 5(6) (f)(i))).

(i) Goods transport ancillary services and goods transport agency services are, in general, treated as supplied where physically performed (s 5(6)(c)(ii), (g)(ii))).

An intra-EU service is treated as supplied in the EU State of departure, but if the customer is registered for VAT, it is treated as supplied in the EU State that issued the customer’s VAT number (s 5(6)(g)(i), (f)(ii)-(iii))).

Taxable person

Meaning of taxable person

A person is a taxable person (s 8) if, and must register for VAT (s 9) if:

(a) his turnover from the supply of taxable goods exceeds, or is likely to exceed €51,000 in any continuous 12 month period,

(b) his turnover from the supply of taxable services exceeds, or is likely to exceed €25,500 in any continuous 12 month period,

(c) the value of his EU imports exceeds, or is likely to exceed €41,000 in any continuous 12 month period,

(d) he disposes of a taxable interest in developed property (see Property transactions below), or

(e) he receives Fourth Schedule services from abroad.

Farmers and sea-fishermen are not obliged to register but may elect to do so (s 8(1)-(3))).

A distance seller selling into Ireland must register for VAT if his turnover from the supply of goods in the State exceeds, or is likely to exceed €35,000 in a calendar year (s 3(6))).

Property transactions

VAT may also be charged on the supply of property (s 4), i.e., land or buildings (immovable goods) which has been developed since 1 November 1972. In this context, development means:

(a) the construction, demolition, extension, alteration or reconstruction of any building on the land, or

(b) the adaptation of land for materially altered use.

The four questions to be answered in relation to a property transaction are:

(a) Has the property been developed since 1 November 1972?

(b) Has the supplier a taxable interest in the property, i.e., an interest of not less than 10 years, and has he disposed of such an interest?

(c) Is his disposal of that interest in the course or furtherance of business?

(d) Is he, or was he, entitled to a purchases VAT deduction on the acquisition or development of the property?

If the answer to any of these questions is no, no VAT is chargeable.

If the answer to all four questions is yes, the next step is to look at the type of interest being disposed of:

(a) Freehold interest: VAT is chargeable on the full sale price.

(b) Lease of 10 years or more: If the lease allows for a rent review within five years, the interest disposed of must be valued by a professional valuer.

If there is no rent review in the first five years, the interest disposed of may be valued (Value Added Tax Regulations 1979 r 19) by any of the following methods:

(i) Three-quarters of the annual rent multiplied by the number of complete years in the lease.

(ii) The capitalised value of the annual rent, calculated by reference to the return on the latest issue of government stock. This is computed by multiplying the annual rent by the latest multiplier issued by Revenue. The multiplier changes each time a new government stock is issued. At the time of going to print the latest multiplier (effective 1 February 2004) is 21.27 based on a redemption yield of 4.702%.

(iii) Professional valuation.

If the lease is between 10 and 20 years, the disponer is regarded as having disposed of the entire property: the leasehold interest disposed of is valued in the manner described in the previous paragraphs; the future reversionary interest is valued as the difference between the value of the lease and the value of the entire property. The disponer is treated as having made a self-supply equivalent to the value of the future interest.

(c) Lease of less than 10 years: Normally regarded as a short-term letting (exempt: Sch 1 para (iv)) but if the disponer reclaimed VAT on the development, the disposal is treated as a self-supply. The disponer may waive his exemption and opt to be chargeable to VAT on the rental income (s 7).

VAT Rates

Current VAT rates

Goods

(i) Exported goods.

(ia) Duty-free goods sold to travellers leaving the State.

(iiib) Goods imported from outside the EU consigned to another EU State.

(v) Sea-going ships of more than 15 tons and international commercial aircraft.

(va) Equipment for use in international commercial aircraft.

(vb) Fuel and provisions for a sea-going ship or international commercial aircraft.

(via) Goods supplied to an authorised exporter.

(vii) Animal feed other than pet food.

(viii) Fertiliser supplied in packages of 10 kg or more.

(x) Gold supplied to the Central Bank.

(xii) Food and drink for human consumption (but not alcoholic drinks, minerals etc, ice cream, frozen desserts, yogurts, chocolates, sweets, biscuits, confectionery, crisps, snacks, salted nuts and popcorn).

(xiii) Medicine for human oral consumption.

(xiv) Medicine for animal oral consumption (but not for pets).

(xv) Food-producing trees, plants, seeds, spores, bulbs, tubers, tuberous roots, corms and rhizomes.

(xva) Printed books and booklets.

(xvii) Children’s clothing.

(xviii) Sanitary towels and tampons.

(xix) Children’s footwear.

(xixa) Invalid carriages and appliances, and artificial body parts (but not artificial teeth, corrective spectacles, and contact lenses).

(xx) Plain white wax candles and night lights.

Services

(iii) The transport of goods in the State as part of a contract to transport the goods to a place outside the EU.

(iiia) The transport of goods within the EU to and from the Azores or Madeira.

(iv) The provision of port or airport facilities for passengers and goods.

(v) The maintenance, repair and hire of sea-going ships of more than 15 tons and international commercial aircraft.

(va) The maintenance, repair and hire of equipment for use in international commercial aircraft.

(vc) Air traffic control services supplied by the Irish Aviation Authority.

(vi) Export agency services.

(via) Services supplied to an authorised exporter.

(vib) VAT refund services supplied to tourists.

(ix) Lighthouse and navigation services provided by the Commissioner of Irish Lights.

(xi) Life saving services provided by the Royal National Lifeboat Institution.

(xvi) Work on movable goods brought from outside the EU for the purposes of such work.

(xvia) Transport of goods imported from outside the EU (provided the customs value of the goods includes the transport charge).

Low rate (13.5%)

The goods and services chargeable to VAT at 13.5% (Schedule 6) are:

Goods

(i) Electricity and heating fuel.

(ii) Food and drink provided for human consumption by a vending machine, hotel, restaurant, public house, café, canteen, or catering business.

(iii) Ice cream, frozen desserts, yogurts, chocolates, sweets, biscuits, confectionery, crisps, snacks, salted nuts and popcorn provided by a vending machine, hotel, restaurant, public house, café, canteen, or catering business.

(iv) Hot take away food.

(xia) Nursery or garden centre produce.

(xic) Livestock semen.

(xid) Live poultry and live ostriches.

(xii) Printed newspapers and magazines, brochures, leaflets and programmes, catalogues, directories, maps, charts, sheet music.

(xvi) Original works of art (paintings, sketches, engravings, sculptures).

(xvia) Antiques more than 100 years old.

(xvii) Literary manuscripts certified as being of major importance.

(xxa) Greyhound food supplied in packages of 10 kg or more.

(xxiii) Photographs and negatives supplied by a professional photographer.

(xxiv) Passport photographs supplied by a photographic vending machine.

(xxviii) Developed land or buildings.

(xxxi) Cakes, crackers wafers and biscuits (i.e., flour or egg-based bakery products) but not chocolate-covered wafers and biscuits, frozen desserts, savoury snacks, chocolates, sweets, and similar confectionery.

(xxxii) Concrete ready to pour.

(xxxiii) Standard-sized concrete building blocks.

Services

(v) Cinema admission charges.

(vi) Admission to theatre and concert shows (that are not exempt: Sch 1 para (viii)).

(vii) Fairground amusement receipts.

(viia) Commercial sports facilities.

(viib) Golf facilities provided by a member-owned golf club if the club’s turnover exceeds €25,500 in any continuous 12 month period.

(viic) Golf facilities provided by a non-profit body if the body’s turnover exceeds €25,500 in any continuous 12 month period.

(viii) Waste disposal services.

(ix) Admission to artistic, cultural, historical or scientific exhibitions (that are not exempt: Sch 1 para (viiia)).

(x) Professional veterinary services.

(xi) Agricultural services.

(xib) Animal insemination services.

(xiii) Accommodation in a hotel, guest house, holiday home or caravan park.

(xiv) Tour guide services.

(xv) Short-term hire of road vehicles, boats, caravans, mobile homes, and tents.

(xviii) Repair and maintenance of movable goods (but not motor accessories, batteries, tyres, tyre flaps or tyre tubes, supplied in the course of a vehicle service).

(xix) Care of the human body (health studios).

(xx) Professional jockey services.

(xxi) Photographic development services.

(xxii) Professional photographic services.

(xxv) Film editing services.

(xxvi) Photographic agency service receipts.

(xxvii) Driving instruction (other than heavy goods vehicles).

(xxix) Building type work (subject to the two-thirds rule).

(xxx) Routine cleaning of land or buildings.

Package rule

This rule applies where goods and/or services chargeable at different VAT rates are supplied for a single combined price. In such a case, the entire package is chargeable to VAT at the highest VAT rate applicable to any of the items included in the package (s 11(3))).

Two-thirds rule

This rule applies where a combination of goods and services is supplied for a combined price. In such a case, if the value of goods supplied in the course of providing a service exceeds two-thirds of the total price for the job, the entire transaction is treated as a supply of goods (not a service) (s 10(8))).

Exempted activities

VAT is not charged on an exempted activity, i.e., any of the following activities:

Goods

(vii) Welfare or social security type goods provided by a non-profit body.

(xviia) Investment gold.

(xviii) Human blood, milk and organs.

(xxii) Goods supplied to its members by a non-profit body.

(xxiv) Goods in relation to which the supplier was not entitled to a purchases VAT deduction (for example, a car).

Services

(i) Financial services.

(ii) Educational activities.

(iii) Professional medical services.

(iiia) Dental technician services.

(iiib) Professional dental services and professional optical services.

(iv) Short-term letting of land or buildings.

(v) Medical care provided by a hospital, nursing home or clinic.

(vi) Non-profit childcare services.

(vii) Welfare or social security type services provided by a non-profit body.

(viii) Admission charges to live theatre, concert and circus shows.

(viiia) Cultural services provided by a Revenue-recognised cultural body.

(ix) Travel agency services, insurance premium collection services, insurance agency services, and financial agency services.

(xi) Insurance services.

(xia) The public postal service.

(xiii) The national broadcasting service.

(xiv) The transport of passengers with their baggage.

(xv) The taking of bets.

(xvi) The issue of lottery tickets.

(xvii) Admission to sports events.

(xviib) Investment gold processing services.

(xix) Funeral undertaking.

(xxii) Services supplied to its members by a non-profit body.

(xxiia) Services supplied by an independent administrative entity to VAT-exempt persons.

(xxiii) The provision of sports facilities by a non-profit body.

(xxv) Catering services supplied to patients in a hospital or nursing home, or to students in a school.

Taxable amount

VAT is chargeable on the total consideration the supplier becomes entitled to receive in relation to the goods or services he has supplied. The gross consideration (i.e., the taxable amount) includes all commissions, costs, charges and taxes (apart from VAT) in respect of the supply (s 10).

Cash receipts basis

The following persons may account for VAT on the cash receipts basis (s 14):

(a) a trader whose turnover derives as to 90% or more from sales to unregistered persons, and

(b) a trader whose turnover is less than €635,000 in any continuous 12 month period.

Self assessment

A taxable person must file a VAT return, and pay the net VAT due as shown on the return, between the 10th and the 19th day of the month following the VAT period (s 19).

E-commerce traders trading into Ireland must file a quarterly VAT return on or before the 20th day of the month following the calendar quarter (s 5A(6)).

If a taxable person fails to file a VAT return within the time limit, the Revenue may estimate the VAT that should have been paid and notify him of their estimate (s 22).

A taxable person must prepare a statement of his intra-EU supplies (VIES statement) in each calendar quarter. He must file that statement to the Revenue before the last day of the month following the calendar quarter (s 19A).

Revenue powers

Administration

The Revenue Commissioners are responsible for the administration of VAT (s 43).

Audit

Every taxable person must keep full and true records of all transactions which affect or may affect his VAT liability (s 16).

If a taxable person supplies goods and services to another taxable person, he must issue the recipient a VAT invoice containing the details required by regulations (s 17).

An authorised officer may at all reasonable times enter a business premises and require the business person, or an employee or associate of his on the premises, to produce for inspection any records relating to the business (s 18).

If an inspector or other authorised Revenue officer believes that a person has underpaid VAT for one or more VAT periods, he may make an assessment of the VAT underpaid (s 23).

Collection

The income tax collection procedures apply for VAT (s 24).

Interest on unpaid VAT is charged at 0.0322% for each day the VAT remains unpaid.

Penalties

A person who fails to comply with VAT obligations is liable to a penalty of €1,520 (s 26). If the failure is negligent, the penalty is €125 plus the difference between the correct liability and the tax paid. If the failure is fraudulent, the penalty is €125 plus twice the difference between the correct liability and the tax paid (s 27).

Appeals

A person aggrieved by an assessment to VAT may appeal within 14 days of the notice of assessment (s 23). The income tax appeal rules apply (s 25).