Value Added Tax

1. Value Added Tax Value Added Tax (VAT) • Indirect Tax • Charged on sales transactions • Collected by VAT registered businesses and traders • VAT Consolidation Act 2010 (VATCA)

2. Value Added Tax Value Added Tax - Definitions • VAT Registered Person • Input Credit • Output VAT • VAT Exclusive • VAT Inclusive

3. Value Added Tax VAT Rates • Zero Rate – 0% • Reduced Rate – 13.5% • Second Reduced Rate – 9% • Standard Rate – 23%

4. Value Added Tax Exempt Supplies • Exempt from VAT • Supplier of exempt supplies cannot register for VAT • Supplier of exempt supplies cannot charge VAT • Supplier of exempt supplies cannot claim input credits for VAT incurred

5. Value Added Tax Exempt Supplies • Financial Services • Insurance Services • Postal Services • National Broadcasting • Education • Medical, Dental, Optical, Hospital services

6. Value Added Tax Zero rated versus Exempt • Supplier of zero rated supplies must register for VAT, charge VAT and can claim input credits for VAT incurred • Supplier of exempt supplies cannot register for VAT, cannot charge VAT and cannot claim input credits for VAT incurred

7. Value Added Tax General Principles • VAT is borne by the final consumer (non-VAT registered person) • Collected at each stage of the supply chain • Each supplier has obligation to charge VAT and entitlement to claim input credits for VAT they have incurred • The VAT registered supplier acts as collector of the tax

8. Value Added Tax VAT Amount • Net amount = VAT exclusive amount • Gross amount = VAT inclusive amount • VAT is calculated as a percentage of the net amount • It may also be necessary to be able convert the gross amount to the net amount

9. Value Added Tax VAT Charge – VAT charged on following transactions • The supply for consideration of goods by a taxable person acting in that capacity when the place of supply is the state • The import into the state • On the supply for consideration of services by a taxable person acting in that capacity when the place of supply is the state

10. Value Added Tax VAT Charge – VAT charged on following transactions • On intra-community acquisition for consideration by an accountable person of goods (other than new means of transport) when the acquisition is made within the state • The intra-community acquisition for consideration of new means of transport when the acquisition is made within the state

11. Value Added Tax VAT Charge – VAT charged when all of the following conditions are met: • There is a supply of goods or services • Within the State • For consideration • Made by a taxable person • In the course or furtherance of business

12. Value Added Tax VAT Charge • There must be a direct link between the supply and the consideration

13. Value Added Tax VAT Registration – The following must register for VAT: • Persons whose taxable supplies of services are likely to succeed €37,500 in any 12 month period • Persons whose taxable supplies of goods are likely to succeed €75,000 in any 12 month period

14. Value Added Tax VAT Registration – The following must register for VAT: • Business persons who are normally exempt and acquire goods in excess of €41,000 annually from other EU countries • Persons making mail order/distance sales into the State, the value of which exceeds €35,000 in any 12 month period • Persons who acquire services from abroad

15. Value Added Tax VAT Registration • Sole Trader/Partnership registers using TR1, Company registers using TR2 • A person who fails to register when obliged to do so is liable to penalty of €4,000 • A person can deregister from VAT when: • Turnover falls below the thresholds • Person ceases to trade

16. Value Added Tax Electing to register for VAT • The following can elect to register for VAT: • Established traders who supplies do not exceed the relevant thresholds • Farmers • Sea fishermen who supply unprocessed fish to other accountable persons

17. Value Added Tax Advantages of electing to register for VAT • Recovery of VAT on start up costs • A person who makes zero rate supplies would get VAT refunds

18. Value Added Tax Disadvantages of electing to register for VAT • Cost of administration of VAT • Risk of VAT inspection • If the VAT registration is cancelled, the person may have to repay input VAT recovered