Value added tax

Charge to tax

Value added tax (VAT) is payable by a taxable person who engages in:

(a) the supply of goods, or

(b) the supply of services,

within the Republic of Ireland (ROI) for consideration in the course or furtherance of business.

VAT also applies to:

(a) the importation of goods from outside the EU.

(b) the Intra-Community Acquisition (ICA) of:

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

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

Supply of goods

Meaning of supply of goods

A supply of goods means:

(a) The transfer ownership of goods by agreement.

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

(c) The handing over land or buildings developed on behalf of another person.

(d) The compulsory acquisition of goods by or on behalf of the State.

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

(f) The appropriation (self-supply) of goods to non-business use.

(g) The transfer of goods from an ROI business to its branch in another EU State.

A supply of goods does not include:

(a) A transfer ownership of goods to a lender as security for a loan.

(b) A transfer ownership of goods back to the borrower on redemption of the loan.

(c) A transfer 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 29(1)(c)).

The exceptions to the general rule are:

(a) An Intra-Community Supply (other than a means of transport) – the place of supply is where the goods’ journey ends. But if the customer is VAT-registered the supply is deemed to take place in the EU State that issued the customer’s VAT number.

An Intra-Community Supply of a means of transport takes place where the goods’ journey ends (s 24(1)).

(b) The place of supply of goods that are assembled or installed is where the goods are assembled or installed (s 29(1)(b)).

(c) For goods supplied on board a boat, plane or train travelling between EU States, the place of supply is the EU State of departure (s 29(1)(d)).

(d) For distance sellers without an EU establishment, selling into an EU State, the place of supply is where the goods’ journey ends (s 30(1)-(2)).

Supply of services

Meaning of supply of services

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

Place of supply of services

There are two place of supply rules, depending on whether customer is a business (B2B service) or a consumer (B2C service):

(a) For B2C services, the place of supply is the supplier’s place of establishment. If the supplier has several establishments, the supply takes place at the establishment most concerned with the supply; if the supplier has no establishment, it takes place at the supplier’s usual place of residence (s 34).

(b) For B2B services, the place of supply is where the recipient is established – the “reverse charge rule.” The supplier must obtain the recipient’s VAT number and record it on the invoice.

Exceptions – the following services are treated as supplied where physically performed: property-related services, passenger transport, restaurants, cultural services, hire of means of transport.

The reverse charge mechanism applies to supplies of construction services between connected persons.

Taxable person

Meaning of taxable person

A trader is a taxable person and must register for VAT (s 65) if in any continuous 12 month period if:

(a) his turnover from the supply of taxable goods exceeds, or is likely to exceed €75,000,

(b) his turnover from the supply of taxable services exceeds, or is likely to exceed €37,500,

(c) the value of his ICAs exceeds, or is likely to exceed €41,000,

(d) he disposes of developed property,

(e) being a distance seller selling into Ireland, his turnover from the supply of goods exceeds, or is likely to exceed €35,000 in a calendar year (s 29(1)).

A farmer or sea-fisherman is not obliged to register but may elect to do so.

Property transactions

Exempt supply

The following supplies are exempt:

(a) undeveloped land,

(b) immovable goods (land or buildings) where the most recent development was more than five years before the supply,

(c) a completed property occupied for at least 24 months since its most recent development, where a taxable supply has occurred since that development between unconnected persons,

(d) a property completed more than five years before the supply, provided only “minor” work was carried out before the supply, i.e., work which does not adapt the property for materially altered use and the cost of which does not exceed 25% of the sale price.

A person making an exempt supply of property, may, together with the acquirer of the property, make a joint option for taxation. In such a case, the acquirer is accountable for the VAT.

Taxable supply

The supply of a developed property which is new and unused is taxable. Broadly, a property is new if it is developed in the five years prior to its disposal and unoccupied.

Letting of property

A landlord may opt to charge VAT on a letting of commercial property. Such an option is exercised by including an appropriate provision in the letting agreement. The option ceases if the landlord:

(a) makes an exempt letting,

(b) agrees in writing with the tenant,

(c) notifies the tenant accordingly,

(d) becomes connected with your tenant,

(e) allows a connected person to occupy the premises,

(d) allows the property to be used as a residence.

A landlord may not opt to tax a letting to a connected person, unless the connected tenant uses the property for an activity in relation to which he is entitled to 90% deductibility.

Capital goods scheme

A property’s tax-life (adjustment period) is generally 20 years (10 years in the case of a refurbished property). Deductible VAT is adjusted for each year (interval) of the property’s VAT life by comparing the VAT deducted on acquisition with the proportion of taxable use during the initial interval. Depending on whether taxable use has increased or decreased, the VAT deduction for that interval will decrease or increase.

Where a person with full VAT recovery sells a property, but did not reclaim VAT on the acquisition of the property, he can get a full VAT credit for the unclaimed VAT, scaled back in accordance with the number of years elapsed since the property was acquired.

A property owner must keep a capital good record for each capital good.