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Value Added Tax

Topic Section
When it arises 1
Taxable Person 2
Place of Supply of Goods and Services 3
Accountable Persons 4
VAT Inputs and Outputs 5
VAT Supply 6
Vat Group Registration 7
Transfer of a Business Relief 8
Calculation of VAT 9
VAT in Exam 10

1. When it arises

VAT is an indirect tax chargeable on the consumption of goods & services and has its basis in EU law.

The act that it is based off is the VAT Consolidation Act 2010

VAT is chargeable on:

1. Taxable supply of goods & services within Ireland by a taxable person in the course or furtherance of business carried on
2. Goods imported into Ireland from outside the EU (VAT is payable at the point of entry)
3. Intra-community acquisition of goods by VAT registered persons
4. Services received from abroad by Irish business

2. Taxable Person

A taxable person is any person who independently carries out business in the state

Required to register for VAT, if turnover will exceed in 12 months:

 €75,000 for supply of goods

 €37,500 for supply of services
 €35,000 for distance sales (mail order)

3. Place of Supply of Goods and Services

There are rules to determine where the place of supply takes place for goods and services. Where goods or services are supplied outside Ireland, Irish
VAT need not be charged – ATE

There are different place of supply rules for the following:

Goods not dispatched or transported The place of supply is deemed to be the place where the goods are at the time of
their supply.
Goods involving installation or assembly The place of supply is the place where the goods are installed or assembled.
Supplies on board vessels, aircraft and trains The place of supply is the place where the transport begins.
Supply of natural gas or electricity Where natural gas or electricity is supplied to a taxable dealer the place of supply is
the place where the taxable dealer has their business.

In the case of supplies of natural gas and electricity to a customer other than a
taxable dealer, the place of supply is where the customer uses and consumes it.
Effectively this is the place where the meter is located
Distance sales You are required to register and account for VAT in this State when your distance
sales to Ireland exceed €35,000 in the calendar year. However, you may opt to
register and account for Value-Added Tax (VAT) on your distance sales even if the
threshold is not exceeded.
Goods that are dispatched or transported The intra-Community supply and acquisition of goods occurs where goods are
(Intra-Community Supplies) dispatched or transported between businesses in different Member States (MS) of
the European Union (EU).

4. Accountable Persons

An accountable person is:

 A taxable person (an individual, partnership, company etc.) who supplies taxable goods/services in the State and who is, or is required to
be, registered for VAT
 Persons in receipt of Intra-Community Acquisitions
 Businesses receiving certain services where the place of supply is deemed to be in the State
 Persons who are in receipt of cultural, artistic, entertainment or similar services from persons established outside the EU

5. VAT Inputs and Outputs

Output VAT: VAT charged by a trader on goods/services supplied to a customer

Input VAT: VAT suffered by the trader on goods/services acquired for use in the business

The amounts of outputs and input VAT are declared the VAT return (VAT 3) for a period:

 If a trader has charged more VAT than he has suffered (i.e. outputs exceeds inputs), the difference is paid to revenue
 If input VAT exceeds output VAT, a refund will be due from Revenue

6. VAT Supply

Supply is the supply of goods or services will fall into one of the following categories:

1. Taxable supplies
2. Exempt supplies
3. Supplies outside the scope of VAT

Taxable Supplies

 Supplies of goods and services are taxable unless they are specifically excluded from the charge to VAT by legislation.
 There are three rates of VAT on the net value of taxable supplies:
o The standard rate of 23%;
o The zero rate; and
o The reduced rates, which are 13.5% and 9%.
 Supplies qualifying for zero (e.g. food basics) or reduced rates (e.g. restaurant meals 9%) of VAT are specifically listed in the legislation.

Exempt Supplies

 Exempt supplies, on which no VAT is charged (e.g. doctor, undertaker, and financial services), listed in the First Schedule to VATCA 2010.
 A business which makes only exempt supplies does not register for VAT and will not be able to recover any input VAT. For such businesses,
VAT suffered becomes a real cost, rather than just a cash flow issue
 No VAT will be charged to a customer where a supply is exempt or zero-rated but vital to distinguish between the two as VAT
consequences are different

Supplies outside the Scope of VAT

Supplies which are outside the scope of VAT can be divided into 2 categories:

 Where the rules on place of supply of goods or services treat the place of supply as being outside Ireland.
 Sundry transactions which are not subject to VAT, including transactions between companies within the same VAT group

7. VAT Group Registration

 Members are treated as a single entity for Vat purposes

 Each member of a Vat group retains its own Vat registration number.
 A nominated member of the Vat group will file Vat returns for the whole group and make the VAT payments
 Vat group registration is at the absolute discretion of the Revenue (no 75% / 51% rules as in CT groups)
 Usually allowed if 2 or more entities are registered in the State and they are closely linked by financial, economic and organisational links
 There is no requirement to charge VAT on intra-group transactions (exception: immovable property transactions ATE)

8. Transfer of a Business Relief

Section 20(2)(C) and Section 26 – states the transfer of a business is deemed not to be a supply for Vat purposes. i.e. The seller does not charge Vat
on the sale if all the qualifying conditions are met.

Conditions for the relief to apply (Aids cash flow):

1. Both buyer and seller are registered for Vat
2. The buyer must have 100% recoverability
3. The buyer must acquire the business as a whole (or part of business if sufficient to be an undertaking operated on an independent basis)
and not just the assets of the business

9. Calculation of VAT

If it says net of VAT means VAT not included

10. VAT in Exam

Basics and a high-level awareness of the VAT issues on transactions needed, for example:

1. VAT rules on L&B are complex & clients should be advised to take specialist VAT advice when undertaking a property transaction – covered
at Tax Elective ATE
2. Where VAT is charged on a property transaction, Stamp Duty is due on the VAT exclusive (net)
3. There is no VAT on share transactions (exempt) and VAT incurred on professional fees (incurred in the share transaction) is not
4. Transfer of Business relief provisions can take a transfer of a business or part of a business outside the scope of VAT