Value Added Tax (VAT) – A breakdown

Maurice O’Brien CPA MBS B.Bus (ACC)
13 February 2019

VAT
VAT is the tax the state charge on the sale or goods or services. This tax is added to the price of most products and service. VAT is a tax on spending in Ireland so VAT is paid by consumers who pay for goods and services. Goods imported into Ireland from outside the European Union are also subject to VAT and is charged by Customs at the point where the goods enter the state.

VAT Thresholds
VAT registration is obligatory when your annual turnover exceeds or is likely to exceed the VAT thresholds. The threshold in relation to distance selling is based on your turnover in a calendar year. In all other cases, the threshold is based on your turnover in any continuous 12 month period. If you are below the thresholds you may still elect to register for VAT.

The principal thresholds are as follows:

  • €37,500 in the case of persons supplying services only.
  • €35,000 for taxable persons making mail-order or distance sales into the State.
  • €41,000 for persons making acquisitions from other European Union Member States.
  • €75,000 for persons supplying goods.
  • €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods. However, while all goods and services are included in total turnover, the 90% figure does not necessarily include all goods sold. The 90% does not include goods sold at the standard or reduced rates which those persons have manufactured or produced from zero rated materials.

A person who, while not established in the state, supplies taxable goods or services in the State, is obliged to register and account for VAT. This applies irrespective of the level of turnover.

VAT Rates
VAT is charged at different rates for goods and services. The main products and service at each VAT rate are as follows:

23% rate of VAT
Alcohol, Computers, Consultancy services, Hardware, Jewellery, Machinery, Paper, Tobacco, Tools & Toys.

13.5% rate of VAT
Coal, Heating, Gas, Oil, Cleaning, Veterinary fees, Hotels, Cinema, Hairdressing & Restaurants.

9% rate of VAT
Newspapers (including electronically supplied newspapers), Sporting facilities & E- books.

4.8% rate of VAT
This is a reduced rate of VAT specifically for agriculture.

0% rate of VAT
Coffee, Tea, Bread, Milk, Books, Vegetable seeds, Wheelchairs, Crutches, Hearing aids, Children’s shoes & Children’s cloths.

Exempt rate of VAT
Financial, Medical & Educational services.

If you are buying and selling goods/services and are not sure of the correct VAT rate you can search the Revenue VAT Database for an extensive list of all vatable goods and services.

VAT on Property
The following rules apply for VAT on property:

  • If you are buying a new house from a builder or developer, you will be charged VAT at 13.5%
  • If you are buying or selling an ‘old’ or existing property, you do not have to pay VAT
  • If you are a landlord, you cannot charge VAT on rent from residential property
  • If you buy a site for a house from a landowner, you do not have to pay VAT unless you have an agreement with both the landowner and a builder to develop the site.

VAT on Imports
This section only deals with VAT for private individuals who buy goods for personal use.

In general, you have to pay VAT and import duty on any goods you are bringing into Ireland from outside the EU. This includes goods purchased online and by mail order. You will have to pay VAT at the same rate as applies in Ireland for similar goods.

Within the EU, VAT is usually paid in the member state you purchased the goods, however, there are some exceptions.

Changes to VAT rates (Budget 2019)
The VAT in the hospitality and tourism industry was lowered to 9% almost 8 years ago to help create jobs during the recession. According to many, including the Finance Minister Paschal Donohoe, the reduced rate could no longer be justified because of the strong performance of the tourism sector and during Budget 2019 the Government opted to restore the rate to 13.5% effective from 1 January 2019.

The government estimates that this increase will raise €466 million this year. The increase had been opposed by many in the hospitality and tourism industry as they fell it will turn customers away and have a knock on affect to employment in the sector. The changes were also opposed by the Restaurant Association of Ireland with CEO Adrian Cummins saying: “I think a lot of businesses are very fearful for their own future based on the VAT rate, it’s basically 50% of their VAT bill every month”.

Businesses have two options to deal with the increase from 9% to 13.5%, they either increase their prices, this would pass the increase onto customers which could result in lost sales or they absorb the extra charge themselves resulting is lower margins. The main Business affected by the increase is hotels, restaurants, coffee shops, hairdressers and cinemas.

For more information please don’t hesitate to contact our office on 021-4321799 or email info@paulodonovan.ie.

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