A new business should register for Irish VAT if it is a “taxable person” under Irish VAT law and where the goods and/or services they supply are deemed to be taxable within Ireland and where the value of the supplies made require that person to register for VAT in Ireland as they have exceeded the appropriate annual turnover level (i.e. €75,000 for the supply of goods and €37,500 for the supply of services).
A taxable person is defined as follows:
“A person who, otherwise than as an employee of another person, engages in the supply, within the State, of taxable goods or services in the course or furtherance of business shall…be a taxable person and shall be accountable for and liable to pay the tax charged in respect of such supply.”
SUPPLY OF GOODS
For businesses supplying goods the position on registration for VAT is relatively straightforward. The place of supply for goods is the place either where the goods are supplied from or the place where they are transported or despatched from.
There is a specific rule for the place of supply for sales of goods via e-commerce or fulfilment centres known as Distance Selling. Here the place of supply is the place where the goods are located but where the value of sales made to customers in other EU Member States (EUMS) exceeds a Distance Sales threshold then there is a requirement to register for VAT in that EUMS also.
SUPPLY OF SERVICES
The place of supply of services was redefined under the VAT Directive 2010 whereby provision was made to determine the place of supply for the majority of services under a General rule and for there to be exceptions to this rule.
The General rule under Article 43 of the Council Directive 2006/112/EC is that “the place of supply of services shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied, or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides”
The General rule also determines the place of supply by the status of the customer receiving the service.
Where the customer receives the service for a business purpose then the place of supply is the place where the customer is established/resides; for supplies to consumers the place of supply is the place where the supplier is established. Under this rule, the requirement to register for VAT in other EUMS can be avoided.
In other words, supplies of services under the General rule confirm that the person is required to register for VAT in the EUMS in which the business is established or where they reside.
A supply of services is the supply of anything that is not a good.
The General rule for determining the place of supply is the place where the supplier of the services is established (or “belongs”), such as a fixed establishment where the service is supplied, the supplier’s permanent address, or where the supplier usually resides. VAT is then charged at the rate applicable in the EUMS where the place of supply of the services is located and is collected by that EUMS.
The General rule for the place of supply of services (the place where the supplier is established) is subject to several exceptions, if the services are supplied to customers established outside the EC, or to taxable persons established in the EC but not in the same country as the supplier. Most of the exceptions switch the place of supply to the place where the services are received.
Such exceptions include the:
- Supply of transport services;
- Supply of cultural services;
- Supply of artistic services;
- Supply of sporting services;
- Supply of scientific services;
- Supply of educational services;
- Supply of ancillary transport services;
- Supply of services related to transfer pricing services.
For the above exceptions, the place of supply can shift to that from where the service is performed or occurs or for services relating to land where the land is located.
- And for many miscellaneous services including:
- Supply of legal services;
- Supply of banking and financial services;
- Supply of telecommunications;
- Supply of broadcasting;
- Electronically supplied services;
- Supply of services from engineers and accountants;
- Supply of advertising services;
- Supply of intellectual property services
the place of supply can be determined by where the service is used and enjoyed, depending on the status of the customer.
SERVICES DELIVERED ELECTRONICALLY
There are special rules for determining the place of supply of services delivered electronically.
The place of supply is determined, as with other services, by the status of the recipient. Where the recipient is in business and receives the service for a business purpose then the place of supply is the place where the recipient is established; where this is in a different EUMS to that of the provider of the service then the responsibility in accounting for VAT shifts to the recipient and VAT is accounted for under the reverse charge accounting procedure.
Where the customer is a consumer i.e. receives the service for a personal purpose, then the place of supply differs from the General rule as it is determined by where the customer is established, has a permanent address or, usually resides. Where the value of sales to customers located in other EUMS exceeds €10,000 per annum then there is a requirement to register for VAT in that EUMS otherwise the supplier accounts for local VAT on the services provided. To avoid the requirement to register for VAT in each EUMS that sales are made to, the business can register for Mini One-Stop-Shop (MOSS) which simplifies the accounting process.
The mechanism for collecting VAT, when the place of supply is not in the same EUMS as the supplier, is similar to that used for Intra-Community Acquisitions of goods, i.e. zero-rating by the supplier and reverse charge by the recipient of the services (if a taxable person). But if the recipient of the services is not a taxable person (i.e. a final consumer), the supplier must generally charge VAT at the rate applicable in its own EUMS.
If the place of supply is outside the EU, no VAT is charged.
The following are examples of some of the rules surrounding the supply of goods or services:
Where goods are dispatched or transported, the place of supply is deemed to be where the transport begins. If A Limited arranges to supply goods located in Cork to B Limited in Manchester and A Limited arranges to dispatch the goods to B’s premises, the place of supply is Ireland, since the dispatch or transport begins there; as the supply is between two EUMS then this is deeemd to be an intra EU desptach of goods where the accounting of VAT is determined by the status of the customer. Therefore, where A Limited is an Irish established business and provided A Limited expects to reach the relevant turnover level it should register for Irish VAT; on the other hand a UK established company fulfilling orders from stock located in Ireland is required to register for VAT in Ireland and there is a zero turnover threshold in place.
Where services are provided in relation to a building the service is deemed to be supplied where the building is located. Therefore if an Italian architect supplies services in relation to a specific building in Cork and his turnover exceeds the relevant limits in Ireland then he should register for and charge Irish VAT on this work.
It is quite feasible that an Irish company incorporated by foreign persons may qualify for the Irish corporation tax rate but may not be engaged in the supply within the State of taxable goods or services and therefore not entitled to an Irish VAT registration. It may be that a VAT registration in another country is more appropriate.
It will be necessary to examine in detail the type of activities a business expects to be engaged in to ascertain whether and where it should be VAT registered. Our VAT consultant can assist you with this as not taking professional advice can be expensive.