VAT Rates Ireland in 2023 - What You Need to Know

If you sell to customers in Ireland, you'll need to be familiar with Irish VAT rates and Irish VAT rules generally. In this guide, we'll take you through Ireland’s VAT system, including VAT rates, registration requirements, compliance measures, and special schemes. We'll also take a look at the impact of Brexit on VAT obligations and how technology solutions can help streamline your VAT management.

Short summary

• Understand the standard 23%, reduced 13.5%, 9%, and 4.8% VAT rates, as well as zero-rated goods and services in Ireland for 2023.
• Become aware of registration requirements, filing deadlines & submission options to comply with Irish Revenue regulations.
• Utilize technology solutions to manage VAT obligations efficiently.

Background to Ireland's Value Added Tax

Value Added Tax in Ireland was introduced in 1972. Irish VAT laws were originally created using EU directives because Ireland is an EU Member State. The Irish official tax authorities are the Revenue Commissioner's office which began in 1923.

Understanding Ireland's VAT rates

Value Added Tax (VAT) is a consumption tax applied to goods and services in many countries, including Ireland. It's an essential part of the country's taxation system, generating significant revenue for the government and contributing to overall economic development. As a business owner or a consumer in Ireland, it's crucial to have a good understanding of how VAT works and the different rates applicable to various products and services.

Standard VAT rate:

In Ireland, the standard VAT rate is the most common rate applied to the majority of goods and services. The standard VAT rate in Ireland is 23%. This means that if you purchase an item or service for €100, the VAT added will be €23, making the total cost of the transaction €123. This rate applies to various items like electronics, clothing, furniture, and services like entertainment and the hospitality sector.

Reduced VAT rates:

In addition to the standard rate, Ireland also offers reduced VAT rates on specific goods and services. As of the last update, the reduced rates were:

• 13.5%: This VAT rate applies to certain items, such as fuel, electricity, building services, and various hospitality sectors like restaurant meals, hotel accommodation, and medical and dental care.
• 9%: Goods and services that fall under the reduced VAT rate include some foodstuffs, use of sports facilities, hairdressing, and admission to certain cultural events.
• 4.8%: The reduced VAT rate of 4.8% applies specifically to agricultural supplies, including most livestock.

Exemptions and zero-rated supplies:

Some goods and services in Ireland are either exempt from VAT or subject to a 0% VAT rate. While both categories result in no VAT being charged, there is a subtle difference between them. Exempt supplies mean that VAT is not charged on those products or services, and businesses cannot reclaim the VAT they paid on related costs. Zero-rated supplies, on the other hand, allow businesses to reclaim the VAT they paid on inputs while not charging any VAT on the final product or service.

In 2023, the Irish government moved certain products to the 0% VAT rate, including newspapers and periodicals, and selected pharmaceutical and health-related products.

The importance of VAT registration

Businesses in Ireland must register for VAT if their annual turnover exceeds the VAT threshold relevant to their business activities. For businesses engaged in distance selling, the threshold is €10,000 per annum. Form TR1 must be completed and submitted to the Irish tax authorities in order to register for VAT. This form can be used for individuals, sole traders, trusts, and partnerships. Limited companies should complete and submit Form TR2.

VAT registration is vital for businesses, as it allows them to charge VAT at the appropriate rate on their goods and services and claim VAT on their purchases. Failing to register or charge VAT incorrectly can result in interest and penalties from the Irish Revenue. Therefore, it’s essential to know when and how to register for VAT in Ireland.

Navigating VAT compliance in Ireland

Ensuring VAT compliance in Ireland involves understanding various aspects like filing frequency, invoicing requirements, and deadlines for submission.

In the following subsections, we'll examine more closely each of these areas to help you navigate the complexities of VAT compliance and avoid potential pitfalls.

Filing frequency

Most businesses file their Irish VAT return every two months in Ireland. However, companies in constant repayment may opt to file monthly, providing more frequent updates on their VAT obligations. Annual VAT returns are also available for eligible businesses, offering a more consolidated reporting option.

Alongside the regular Irish VAT return, businesses must also submit the Annual Return of Trading Details, which is a more comprehensive report on their taxable supplies throughout the year. This return helps the Irish tax authorities ensure the accuracy of the VAT collected and paid by businesses during the year.

Invoicing requirements

Proper VAT invoicing is essential for establishing VAT liability and allowing VAT-registered customers to reclaim VAT charged on their purchases. In Ireland, specific invoicing requirements must be met to comply with VAT regulations, including the issuance of a proper VAT invoice. These requirements include:

• Issuing the invoice on the date of supply or by the 15th day of the subsequent month
• Including a distinctive sequential number
• Incorporating the customer’s VAT identification number if applicable
• Indicating the amount of VAT being charged

By adhering to these invoicing requirements, businesses can:

• Ensure compliance with Irish VAT legislation
• Maintain accurate records of their VAT transactions
• Facilitate VAT return preparation
• Avoid potential disputes with customers or tax authorities

Deadlines and submission

VAT returns in Ireland are due on the 19th of the month following the reporting period, with an extension available for electronic filers until the 23rd. Filing deadlines are crucial as missing them can result in penalties and interest charges from the Irish Revenue. Businesses can submit their VAT returns online through their ROS account or complete the form using the ROS Offline application and upload the file for submission.

VAT obligations for cross-border transactions

Cross-border transactions require businesses to understand their VAT obligations, including distance selling thresholds, place of supply rules, and reverse charge mechanisms. The distance selling threshold is no longer valid for businesses in Ireland selling their products to UK consumers post-Brexit. This is an example of how the Brexit transition period affected foreign sales.

When selling services to other businesses in the EU, the reverse charge mechanism often applies, with the customer being responsible for accounting for VAT on the purchase in their VAT return. For supplies to non-business customers outside the EU, the transactions are exempt from VAT, but proof of the customer’s status must be provided.

To ensure compliance with VAT regulations in cross-border transactions, businesses should stay informed about the latest rules and seek advice from tax professionals if necessary.

Special VAT schemes: OSS, IOSS, and VIES

Special VAT schemes like OSS (One Stop Shop), IOSS (Import One Stop Shop), and VIES (VAT Information Exchange System) simplify VAT declarations and payment for cross-border sales, allowing businesses to register and pay VAT in one EU Member State.

VAT OSS is a taxation system applicable to different types of businesses. These include those providing telecommunications, broadcasting, and e-services to private consumers, and businesses carrying out cross-border supply of services within the EU on a Business to Consumer (B2C) basis.

IOSS facilitates the declaration and payment of VAT on imported goods within the scope of the scheme, such as goods situated outside the EU at the time of sale and dispatched in consignments of an intrinsic value not exceeding €150.

VIES, on the other hand, ensures the accurate application of the 0% tax rate in intra-community transactions and facilitates the exchange of information between EU tax authorities.

By utilizing these special schemes and maintenance services, businesses can streamline their VAT management and ensure compliance with cross-border VAT obligations.

VAT and Brexit: How to charge VAT to UK companies

Charging VAT to UK companies post-Brexit involves applying the reverse charge mechanism for VAT-registered businesses and charging Irish VAT for non-registered businesses. The reverse charge mechanism requires businesses to indicate “reverse charge will apply” on their invoices and include the customer’s VAT number, with the customer then being responsible for reporting the VAT to the relevant tax authorities.

Given the potential complexities arising from Brexit, businesses should:

• Seek advice from a tax professional or an accountant knowledgeable in VAT regulations to ensure compliance with the most recent rules and any modifications that may arise.
• Stay informed and proactive in addressing VAT changes resulting from Brexit.

Managing VAT with technology solutions

VAT compliance software such as that offered by Taxually can help businesses manage their VAT obligations, check for errors, and prepare VAT returns, ensuring compliance with Irish VAT legislation.

By leveraging VAT technology, businesses can automate and streamline their VAT management processes, reducing the risk of errors and non-compliance. In the ever-changing landscape of VAT regulations, utilizing technology can provide businesses with a competitive edge and peace of mind when it comes to meeting their VAT obligations.

Conclusion

Understanding Ireland’s VAT rates and regulations is crucial for businesses. By staying informed about VAT registration requirements, compliance measures, cross-border VAT obligations, and special VAT schemes, you can ensure a smooth and compliant experience in the Irish market. And with the help of VAT experts and VAT compliance technology, you'll be better able to manage your VAT obligations.

Frequently Asked Questions

What is the VAT rate in the Republic of Ireland?

The standard Irish VAT rate is 23%, with reduced rates of 13.5%, 9%, and 4.8% applying to specified supplies.

When did the 21% VAT rate end in Ireland?

On February 28, 2021, Ireland ended the temporary 21% VAT rate which had been in place since September 1, 2020.

How often do businesses in Ireland need to file VAT returns?

In Ireland, businesses are required to file VAT returns bi-monthly, although monthly and annual options are also available.

How do I find an Irish VAT number?

VAT can be verified using various means in Ireland. The easiest solution is using the VAT Information Exchange System website, run by the European Commission.