VAT Registration
When you are starting your own business, whether as a sole trader, partnership or a company, you need to determine if you are obliged to register for VAT and what VAT rate should be applied to your sales. Once registered VAT charged on sales needs to be paid to the Revenue Commissioners (after deducting VAT on purchases and expenses) on a timely basis.
Who needs to register?
The main reason for registering for VAT is that the business engages in the supply of taxable goods or services within Ireland.
A business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €37,500 (in the case of supply of services) or €75,000 (in the case of supply of goods) is not obliged to register for VAT.
A business that does not, nor is likely to, exceed the relevant limit may still elect to register for VAT and will be obliged to charge and account for VAT on sales and can claim back VAT on purchases.
A word of warning. When you first commence in business you may not need to register for VAT due to turnover being under the threshold. However, once turnover exceeds the threshold, you will need to register and subsequently your sales prices will increase by the VAT amount. This is not normally a problem if you are selling business to business as your customer can claim back the VAT. However, it may cause problems if you are selling to the general public or to businesses not registered for VAT. These customers cannot claim back the VAT and may not be willing to pay higher prices.
Other reasons for VAT registration are:
- The business makes intra Community acquisitions of goods.
- The business receives fourth schedule services (for business purposes) from abroad. Fourth schedule services include consultancy services provided by accountants, lawyers, consultants and engineers. All persons, other than private individuals, who receive fourth schedule services from abroad (for business purposes), must self account for the Irish VAT and must therefore be registered for VAT regardless of the above.
- The business is involved in property transactions within the State and needs to register for VAT as a result of same.
To register for VAT, you will need to complete a Form TR1 (sole trader/partnerships) or Form TR2 (for companies).
Exempt Activities
Certain business activities are exempt from VAT and are not permitted to charge VAT on their sales. Although they may be required to register for VAT if they are in receipt of fourth schedule services as outlined above.
Examples of exempt activities are certain financial services, education, medical services, charities and taxis.
VAT Rates
When it comes to VAT rates, there are no hard and fast rules. For example, there is a myth that goods are at 21% and services are at 13.5%. It is not as simple as that. Luckily the Revenue Commissioners have an index of VAT rates online which contains the VAT rates of thousands of services and goods. It is a good start when determining which VAT rate you should be charging on your sales. However, unless your business is straightforward, we advise seeking the advice of your local tax office or a professional advisor, before you start issuing invoices or setting up your cash register.
VAT Returns
VAT returns are normally prepared on a bi-monthly basis (e.g. January/February would be returned together). The VAT on sales for the two months as well as the VAT on purchases for the two months must be entered on the return and the difference paid over to the Revenue Commissioners. The deadline for submission of the return is the 19th day of the month following the VAT period (e.g. 19th March for the January/February return). If the return is filed and paid online (ROS) then the deadline date is extended to the 23rd of the month. To register for ROS, go to www.revenue.ie.
Some businesses can prepare VAT returns on a six-monthly basis (whether the annual VAT liability is €3,000 or less) or four-monthly (VAT liability between €3,001 and €14,400). However, I always advise clients to prepare their VAT returns on a bi-monthly basis if possible as it ensures that the books and records are kept up to date and doesn’t allow a large VAT liability to build up over 4 to 6 months. Some clients have a separate bank account where they lodge the VAT portion of each sale so when it is time to pay their VAT liability they have the funds available.
Remember to file returns on time, otherwise penalties and/or interest will be applied – even if only a few days late.
See also:
Hi Orla,
I am considering opening a coffee shop and am trying to work out if serving coffee counts as selling goods or services. It seems to me to be both…
Hi Victoria,
Thanks for the comment. The rules on VAT for cafes can be a bit tricky.
Another reader asked a similar question and you can find the answer here http://blog.parfreymurphy.ie/2010/04/retailers-cash-registers/
If you need any further help please let me know.
Best regards,
Orla
Hi,
I found your website while searching on whether I am liable for VAT. I was working for an American company, but had to return to Ireland for personal reasons. We decided that I should continue to work for them as a contractor. I have never charged them VAT (was in fact advised that I didn’t have to by a friend). They are not a VAT registered company. What is my position?
And yes, I feel very foolish for not looking into this better beforehand!
Hi,
Thanks for the comment.
If you are providing a service to an American company based in America then you shouldn’t need to charge VAT. (However, if you are providing a service to an American company and issuing an invoice to their Irish branch, then that’s another story.)
Best regards,
Orla
[...] When your company is formed, register for taxes using Form TR2, paying particular attention to VAT registration. [...]
Hi Orla- Not sure what box on vat registration form should decide, it is Sole trader IT business. The business will most likely fall under: (( (a) website supply, web hosting, distance maintenance of programmes and equipment b) supply of software and updating of it c) supply of images, text and information, and making databases available))-as far as i know this is called Fourth Schedule Services (but could be wrong here).
If sole trader have Not opted to register voluntarily i.e. sole trader opted to tick other box on the VAT Registration Form: (i) ”Are you registering because your turnover is likely to exceed the limits prescribed by law for registration” I have assumed this is the case where future customers that are indeed vat registered, do require from sole trader to be VAT registered to do business with sole trader.
Or looking at the second scenario , ticking the box (ii) ”because you are in receipt of Fourth Schedule Services”-would ticking this box make more sense or even be correct thing to do?
As an example lets assume start up business passed couple of years, and after a while (say 2-3years in future) assuming that business will not succeed and there will be decrease in the sale-As a result of downturn.
Finally sole trader may decides to De-register for vat as vat registered clients decreased too in this example. Ticking one of these two boxes, Would my friend sole trader still have to repay vat i.e. clawback?
Even if reasonable genuine explanation to revenue will be given?
In other words, ticking what box on the vat registration form,would have what implications? Best Regards, Derek
Hi Orla,
In addition to above post, I read revenue guide regarding 4th schedule services and I got confused, if on the VAT registration form I opt to choose the 4th schedule services, will I still be able to claim/charge vat on my purchase/sale in Ireland. Is 4th schedule services anything different from being normally VAT registered business? Appreciate your help. Derek
Hi Derek,
Thanks for your comments. If I understand correctly you are wondering whether to register for VAT as a sole trader as you don’t know how the business will go. Because you mentioned Fourth Schedule Services I presume that you will be doing business with customers/suppliers outside of Ireland.
Registration
Firstly, I’ll deal with the question of registration. As you know, there are three different boxes to tick:
(i) Registering for VAT because your turnover will exceed the limits (€37,500 in the case of services). You need to state your turnover in section 18.
(ii) Registering for VAT even though you know your turnover won’t exceed the limit of €37,500. Some businesses register for VAT to claim back VAT on initial setup expenses which may be significant. Remember you must then charge VAT to all customers.
(iii) Registering because you are in receipt of Fourth Schedule Services. This is where you are paying a foreign business for services. This has nothing to do with your business providing Fourth Schedule Services.
You will more than likely have a decision to make between (i) and (ii).
If you choose (ii) then if you subsequently deregister for VAT, the Revenue may seek to recoup any excess of VAT refunded over VAT paid during the 3 years prior to the cancellation (or the period of election if less). If you choose (i) you should not have this problem if you need to de-register later because your turnover falls.
It may be difficult to predict what your turnover will be for the first year, so you need to give your best estimate. If you decide not to register for VAT initially you should monitor your turnover projections to see if you will go over the threshold and consider registering.
You mention in your first comment about future customers requiring you to be VAT registered to do business with you. This shouldn’t be the case for Irish customers. The decision to register for VAT should be based on the Revenue guidelines above. If these customers are foreign customers they may be referring to the Fourth Schedule Services legislation, i.e. (iii) above.
Fourth Schedule Services
Finally, 4th Schedule Services becomes an issue if you are supplying services to foreign companies or receiving services from foreign companies. Have a look at the Revenue’s table on Fourth Schedule Services which may be of help:
http://www.revenue.ie/en/tax/vat/leaflets/fourth-schedule-services.html
If you want to give me some examples of Fourth Schedule services you will provide or receive, I can let you know what you need to do in terms of your VAT invoice and your VAT return.
All the best,
Orla
Hi Orla,
Thank you for help. As example will be doing web design and possibly receive some web design services too.
What would I need to do in terms of VAT invoice and VAT return ?
Best Regards. Derek
Hi Derek,
Can you let me know which countries your customers will be based and which countries any suppliers of web design will be based so I can let you know how the VAT would be treated.
Best regards,
Orla
Hi Orla,
Should I register for VAT if I buy some supplies from abroad? Let’s say, I need some materials to complete the project and these are cheaper in other EU country.
Many thanks
Damian
Hi Damien,
In the case of supplies in the State and intra – community (EU) acquisitions, registration is obligatory where certain turnover thresholds are exceeded or are likely to be exceeded in any twelve month period.
The thresholds applicable are as follows:
€37,500 in the case of persons supplying services
€75,000 for persons supplying goods
€41,000 for persons making intra – Community acquisitions
You are not required to register for VAT if your turnover does not reach the appropriate threshold above. However, you may elect to register for VAT as per my post above.
If you do register for VAT, remember that you will need to charge VAT to your customers at the appropriate rate. The rates for many products and services can be found at http://www.revenue.ie/en/tax/vat/rates/index.jsp. You can also then claim back VAT on your Irish purchases also.
If your customers are the general public (or are business customers not registered for VAT) then your prices will go up by the VAT amount and they won’t be able to claim the VAT back. VAT registered business customers can claim the VAT back so it should not matter to them whether or not you are registered for VAT.
Best regards,
Orla
Hi Orla
Is it possible for a company to de-register for VAT if their turnover is less that 37,500 euro?
Hi Denise,
If a company’s turnover is less than €37,500 (for companies providing a service) then there is an option to deregister for VAT. Have a look at this blogpost on cancelling VAT registration. If you have any other queries please let me know.
Best regards,
Orla
Hi Orla,
Can you explain how I calculate payment on vat in ireland. I’m currently setting up as a consultant in ireland so I think I fall under the 37500 threshold. I’m not registered at present but I am considerinmg it. In my case is vat only paid on profits above 37500? My concern is I am not registered at present and do not charge vat or allow for vat on my rates. If business picks up and I exceed 37500 I will have to register I have not allowed for that cost at the start.
Kind regards
Martin
Hi Martin,
Firstly, VAT is charged on your sales not your profit. Therefore you need to look at your sales figure for the next 12 months to see if your sales will exceed €37,500. If you think it will, then you should register. If not, then you don’t need to. You should review your projected sales figures regularly to see if you may exceed the threshold in future.
VAT is added to your sales invoices so it isn’t any extra cost to you. Therefore if you currently invoice someone for €1,000, after registering for VAT, you would charge them €1,000 + VAT = €1,210. The additional €210 that you will get paid must be returned to the Revenue every 2 months (or 4/6 months depending on your level of VAT liability per year).
If you are registered for VAT, you can also claim back the VAT on your purchases such as telephone, office equipment etc. Add up the VAT amount on the invoices for these type of items every two months and you can deduct it from the VAT on Sales (€210 in above example).
If you find at the end of the year that your sales are €38,000 for example, just register from when you find out. You don’t have to backdate the VAT registration. Having said that, you will need to review your sales figures on an ongoing basis to see if you will reach the threshold in future.
Best regards,
Orla
Hello Orla
I wonder if you could give me information about my case, as I am pretty lost. I am foreign translator resident in Ireland, and I would like to do some freelance translation work for customers in EU. I dont think that I will reach the threshold of 37K, but I was thinking of registering for VAT to claim against Irish purchases, eg computing, printed material, advertising and other running expenses. Some of my potential customers would be private, some of them would be educational institutions which would count as business I guess. I was reading the new legislation about New Intra-Community VAT Rules on Place of Supply for Services (http://www.revenue.ie/en/tax/vat/leaflets/place-of-supply-of-services.html) but I find it most confussing. In Paragraph 2.2 Exceptions to the General Rules it says that for “Cultural, artistic, sporting, scientific, educational and entertainment or similar services, place of supply is where the services are physically carried out.” Does this mean I have to charge VAT regardless the client is private or business? Then, in “Paragraph 3.5 B2C supplies to customers outside the EU” it says that “No VAT will be charged by the service provider on the following services supplied to non-business customers established outside the EU (…)
3. the services of consultants, engineers, consultancy firms, lawyers, accountants and other similar services, as well as data processing and the provision of information”.
Any help appreciated, best regards
Angelica
Hi Orla,
My VAT reg company will be suppling services to a charity, they say they are not VAT exempt, so how much VAT do I invoice them and why would they not be VAT exempt? ( they provide free Health services and are funded by various organisations, incl. HSE, Mental Health Ire).
Any help would be greatly appreciated,
Best regards,
Leigh
Hi Leigh,
Generally, you will need to invoice the charity the same as your other customers. The Revenue have brought out a leaflet on VAT on Charities which may be of interest.
Best regards,
Orla
Hi Orla,
I have a vat registered business. I recently entered into a contract to act as asubcontractor for a business in England which is also VAT registered. What are the VAT implications for me? Do I charge VAT when invoicing them? Can I claim VAT back? Just a little confused on the VAT issues with the UK.
Many thanks
Hi Deirdre,
Can you let me know what business you are in and what service you will be providing to the UK company? Also, will the service be carried out in Ireland or in the UK?
Best regards,
Orla
Hi Orla,
My business will be maintaining gym equipment throughout Ireland but the contract is from a Company VAT Registered in the UK.
Many thanks
Deirdre
Hi Deirdre,
In relation to your recent VAT query please refer the Revenue’s website on http://www.revenue.ie/en/tax/vat/leaflets/place-of-supply-of-services.html which should be of assistance to you. Please also beware of the two thirds rule. More information regarding this can be found on http://www.revenue.ie/en/tax/vat/supplies/index.html
If you require any further assistance please do not hesitate to contact me.
Best regards,
Orla
Hi Orla, I came across this site and was very impressed well done. My question relates to you previous comment as follw; “Some clients have a separate bank account where they lodge the VAT portion of each sale so when it is time to pay their VAT liability they have the funds available.”
I know this might sound like a basic question, but, what do you physically do with the cheque you receive for say €1210.00 when going to the bank? Is it best to fill out the vat portion of the cheque into the vat lodgement for the €210.00 as this would seem like it would be a problem as your business current account would only show up a lodgement of €1000.00? what’s the best way of lodging it into the account and the vat account at the same time? thanks in advance for your assistance.
Many thanks, Dave.
Hi Dave,
Thanks for the comment! Glad you like the blog.
When you are in the bank lodging the cheque for say €1,210, you could do a transfer to your VAT account of €210 at the same time. Alternatively, if you have internet banking you could transfer the VAT portions of all lodgements once a week/fortnight etc.
While it might seem to be a chore at the time, when the VAT return comes around, you will be glad that you have saved up for it. As you will have transferred the VAT on Sales amount, you will have a surplus in the bank account amounting to the VAT on Purchases. You can either use this to save for income tax / corporation tax at the year end or use it towards the next VAT return (or return it to your regular current account).
Best regards,
Orla
Hi Orla,
Thanks very much for your speedy reply, it was very helpful.
Regards, Dave.
[...] will need to register for income tax and possibly VAT (if your turnover is expected to hit the relevant threshold) with the Inspector of Taxes on [...]
Hi Orla
im set up as a sole trader in my courier business due to the down fall in business im taking on some landscaping job also some of the jobs i do i need to be vat register.Can i mix the two business
Hi Tom,
You can carry out the two types of trades under the one sole trader VAT number. To see if you need to register you will need to check the relevant thresholds, e.g. sales of €37,500 for services. As you are carrying out two separate trades you would normally combine the sales to see if you reach the threshold.
You could argue that the trades are not of the same nature and that you should not combine them. However, this may be difficult if you are trading as a “one man and his van” type business.
I would need to know the full facts before I could give a definitive answer.
Best regards,
Orla
Hi Orla,
As a self employed graphic design business, I want to pay a Freelancer in another EU country.
Can I register these payments as expenses, goods for resale? He is actually providing logos or other graphic design services.
I have to say that this freelancer I am working with….I don’t think he pays any taxes in his own country.
Thank you for your help!
Hi Ana-Maria,
I would request an invoice from the freelancer for work done so that you have evidence of the transaction in your books and records. It can be included in your expenses in your books and records.
Remember that there are VAT implications concerning providing services to a business in another EU country which both of you will need to comply with. http://www.revenue.ie/en/tax/vat/vat-international-transactions-foreign-traders.html
Best regards,
Orla
Hi Orla,
I am starting out doing kids parties and I need my van to get around but ive been told I need a VAT number to have a commercial vehicle now.
What do I need to do? Im sure I wont be making 37,500 euro dont get me wrong that sounds great but in the real world dont think so.
Hi Jason,
This sounds very strange. Can you let me know who told you this e.g. Revenue official, car dealer etc?
Thanks,
Orla
Orla,
As a sole trader not registered for VAT, I may be providing goods (prints) to businesses who are registered for VAT.
Is there a specific way the invoice need to be detailed, as the buyer will want to claim VAT back?
Thank you for your valuable blog.
Hi Steph,
As you are not registered for VAT, you should not mention VAT at all on your invoice. As your invoice won’t contain VAT, your customer won’t be paying VAT so cannot claim any VAT back.
Best regards,
Orla
Hi Orla,
Congratulations on a great blog. In a college scenario, I understand that classroom courses in a pupil-teacher environment is VAT exempt, but if the college is also selling Vatable goods and services below the turnover thresholds, they can elect to register for VAT to recover input VAT. My question is, can the business recover input VAT on all purchases and expenses relating to the college e.g. stationery, telephone costs, equipment, repairs etc?
Thanks,
Ronan
Hi Ronan,
Thank you!
My colleague Una replied to your query by email while I was away. If you have any further queries, please let us know.
Best regards,
Orla
Hi
We have started a small marketing business which has been running for a couple of months. We did’nt register for VAT but fortunately business is better than we expected it to be and it looks as if we are going to go over the €37,500 threshold.
If we register now will we be liable to pay VAT on invoices that we have issued to customers up to now ie. invoices that we have not added VAT to ?
Best Regards
Simon
Hi Simon,
I understand my colleague Una replied to your query by email while I was away. If you have any further queries, please let us know.
Best regards,
Orla
Hi Orla,
I have been scrolling through your q&a’s and found it very useful. I found this question, from Simon, which is exacly the one I wanted to ask, and see that you didn’t post and answer, as it was answered by email. Wondering if you could please post the answer?
In particular, I have just started working for myself, and have got some consulting work. I only started in November, so definitely won’t reach the VAT threshold in this tax year, so haven’t registered for VAT, and won’t add VAT on invoices initially. I was going to continue like this for a while until I see if there is potential in this business, or if I go back into employment again. If, like Simon, I stay in consultancy service as a sole trader and go over the 37,500 threshold, will I be liable for the VAT on income earned for services I provided before reached this threshold? ie, where I have not charged VAT to the client? Or do I just have to start charging and submitting VAT after this?
Regards,
Kerri
Hi Kerri,
As soon as you commence to trade as a sole trader you are obliged to register for income tax purposes with the Revenue Commissioners via a Form TR1. As you are aware you must register for VAT purposes where your turnover threshold is exceeded (€37,500 in your case) or is likely to be exceeded in any 12 month period.
If at the outset you feel that your expected turnover in the next 12 months is not likely to exceed the relevant threshold then you do not have to register for VAT purposes. However you need to monitor your turnover regularly and as soon as you feel that you are likely to exceed the relevant threshold you must register for VAT immediately.
You will then be liable to charge VAT on any invoices raised post VAT registration. VAT will not have to be charged on any invoices raised pre VAT registration.
Please do not hesitate to contact us should you have any further queries.
Regard regards,
David
Hi Orla,
I purchased a tractor in 2007 before I registered for VAT in 2008. Being non-registered, I did not claim input VAT. After registering I bought a new tractor on which I claimed VAT, and used the 2007 tractor as a trade in. As I had not cliamed input credit on the 2007 tractor, the dealer told me I did not have to pay VAT on selling it to them. However, I now see that they gave me a self-billing invoice showing a VAT amount on the tractor I gave them, and saying I should account for it as input tax. I am now worried that I should have paid VAT on the tractor I traded in?
Thanks,
Devon
Hi,
I have a wedding stationery business and am thinking of doing a new business for DIY wedding invite supplies. Is the combined turnover looked at and would I then have to charge VAT on sales at both businesses?
Hi Karen,
Thanks for your comment.
In general a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €75,000 (in the case of supply of goods) is not obliged to register for VAT. Assuming both business are operated as a sole trade, the combined turnover would be used in assessing VAT registration.
IF you require any further information please get in contact with us on 021 4310266
Kind regards,
David.
We’re a group of volunteers and starting a new scheme in our community. Your web site provided us with useful info to paintings on. You’ve performed an impressive job and our entire group will likely be thankful to you.
Hi, found your blog very interesting but still am confused as to the VAT thing. As a registered charity providing vol first aid / medical services in Ireland, do we have to pay VAT on our rent of our building especially considering we’re only there a couple of nights a week?. Any help you could give would be very much appreciated. Thank you in anticipation of any help
Hi Autin,
Thank you for your comment.
There is no general exemption in respect of Value Added Tax for organisations which have been granted charitable tax exemption. Please have a look at the FAQ’s – charities on the Revenue Commissioners website. There is also a explanatory leaflet on Value Added Tax in the case of Charities which outline specific reliefs from VAT.
Kind regards,
David
Hi…I’ve started a business where I sell 2nd hand baby gear, toys & children’s clothing for people. I am definately not making €37,000 to register for VAT but someone told me that because I am selling 2nd hand items for people that I would be VAT-exempt. Is that true? Thank you for your response.
Hi Maureen,
Thanks for your query. Second hand goods are chargeable to VAT at the same rate as the goods when sold as new. Therefore, if something is 23% when sold new, it would also be 23% when sold second hand. But the rates can be different depending on the items being sold – Children’s clothing is liable to VAT at zero percent, toys are liable to vat at the standard rate of 23%.
If you have any other questions with regard to the VAT, please get in touch with me.
Kind regards,
David
HI Orla, This is a great post! Appreciate. I am in the same situation like Derek.. trying to find out whether I need to register for VAT.. I am a web developer, starting business, sales seems will not exceed 37500 threshold for this year but I use suppliers from non-EU country (India) for online consulting,training & website development. However, my suppliers are not VAT registered..They provide freelance services. Are these services come under 4th schedule services? Do I need to register for the VAT in this case? Could you please advise. Thanks
Hi,
Thanks a million for taking my question.
I am a professional golfer(sometimes!;0)
Are golf lessons given to or as educational purposes exempt from VAT if I am registered and can I then exclude these lessons from my income for taxation purposes?
Thanks,
Dave
Hi David,
Thanks for your query. Sports coaching provided in the course of a business is liable to VAT at the standard rate i.e. 23%. All income earned from these lessons needs to be accounted for and included as income for taxation purposes.
Kind regards,
David