Guide to VAT

What is VAT?

VAT is an indirect tax on the purchase price of products and services purchased or sold in Ireland.

So whether you are a company or a sole trader, you must register for VAT if your turnover exceeds the VAT registration threshold within any consecutive 12 months.

This VAT threshold is €75,000 for taxable supplies of goods and €37,500 for services.

From 1 January 2024, the VAT threshold for services will be €40,000, and for goods, it will be €80,000.

How is VAT charged?

If your annual turnover in business operating in Ireland goes beyond the VAT threshold for a consecutive 12 months, register for VAT. However, if your annual turnover doesn't exceed the VAT threshold presently but you expect to surpass that amount over the next 30 days, you must report it immediately. Otherwise, you can voluntarily register for VAT, which has advantages for reclaiming VAT on expenses.

However, if an individual carries out only VAT-exempt or non-taxable activities, they may not register for VAT. But, in situations like acquiring goods from other member states or receiving services abroad, you must register for VAT.

Once registered for VAT, you can charge it to your customers on business goods and services.

You can claim the paid VAT by filing a VAT return with Irish Revenue, usually every two months.

The VAT return must outline the VAT charged to customers and the paid VAT amount over that period.

What is the VAT rate in Ireland?

The standard VAT rate in Ireland is 23% as of 1 January 2023.

Some goods and services are subject to a reduced VAT rate of 13.5%, a second reduced VAT rate of 9%, and a zero rate for specific goods and services.

How to calculate VAT?

You can quickly determine how much VAT you need to pay on goods and services to Revenue.

• Multiply the original product and service price by 1.23- 23%, the standard VAT rate.
• Multiply the VAT-inclusive price by 1.135 for a reduced VAT rate of 13.5%.
• Finally, calculate the second reduced VAT rate of 9% and multiply the VAT-inclusive price by 1.09.

To calculate the total price excluding VAT:

• Divide the original price by 1.23 for the standard VAT rate of 23%.
• For a reduced VAT rate of 13.5%, divide the original price by 1.135.
• For the second reduced VAT rate of 9%, divide the original price by 1.09.

What is my VAT number?

On successful registration for VAT, you receive a unique sequential number.

It starts with IE and is followed by eight characters, where the second character will sometimes be a letter, but the last is always a letter, and the rest are numbers.

Whenever you submit VAT returns to Revenue, it's essential to double-check your Irish VAT number. The revenue department may invalidate your claim for any mistakes made on your VAT return.

What items are not subject to VAT?

Numerous goods and services aren't subject to VAT. However, the Revenue Department didn't publish a comprehensive list of these items.

Certain food and drink, oral and non-oral medicines, books and booklets, sanitary products, and newspapers charge zero VAT rate. However, many others are categorised as VAT-exempt goods and services.

Therefore, we always suggest you consult a VAT specialist for more in-depth knowledge of zero-rated and VAT-exempt items.

How can you check if a VAT number in Ireland is correct?

The standard way to check for a VAT number Ireland is to use the VAT checker, European Commission Vowned IES (VAT Information Exchange System). You can search for a VAT number in a member state, Northern Ireland, from the portal.

If the EU VAT information exists, it will be displayed in the VIES tool when you search for a number. Otherwise, the system returns an invalid status.

You can also check the validity of VAT numbers by calling the Irish Revenue Commissioners' VAT registration unit. They will help you confirm if the VAT number check is valid and provide you with the company name and related address.

Why is it essential to check a VAT registration number?

Checking a VAT (Value Added Tax) registration number is essential for businesses engaged in vatable supplies because:

• Verification of legitimacy
• Input tax recovery
• Compliance with tax regulations.
• Avoiding penalties and fines
• Preventing VAT fraud- like missing trader fraud (also known as carousel fraud)
• Cross-border transactions
• Reclaiming VAT on exports
• Minimising disputes
• Maintaining business reputation

In summary, checking a VAT registration number is fundamental to ensuring tax compliance, preventing fraud, and conducting transparent and lawful business transactions.

What should you do if your VAT number isn't valid?

You need to immediately ask clients or suppliers to re-check the VAT number they provided if it seems invalid.

However, even after cross-checking the VAT number twice, they send you the same number, and you must advise them to report to the Revenue Commissioners' VAT registration unit immediately.

This is because failing to provide a valid VAT number can cause multiple problems in the future.

How to reclaim VAT?

To reclaim VAT, you must use a valid VAT validation invoice from a supplier or relevant Customs receipt and claim your VAT 3 return.

However, you cannot reclaim VAT on products and services for developing exempt supplies or for your non-business activities.

If a part of that cost goes towards taxable supplies, you can claim only for that portion on your VAT return.

The deadline for claiming a repayment of VAT is four years.