This week, I’ll give you some VAT tips. I was thinking about how I’ll make VAT sound exciting. And what about a song that would jazz up the blog a bit? I found a song, but the exciting bit is a stretch. And you’ll have to be a certain vintage to know the song! Yet there will be some very useful tips to help you understand some Irish VAT rules.
I find VAT tricky. We did some VAT training this week in the office. Going through the basics was a great refresher for the team, as common issues come up. It’s fair comment to say that Revenue are very mindful of VAT and careful to issue VAT numbers. They’ll do plenty of due diligence before they register you. Be prepared for queries and don’t expect to get a VAT number in a few days. Let’s look at
- Registration Thresholds
- Two-tier registration
- VAT Rates
- VAT Returns
- Summary
Registration Thresholds
The current VAT registration thresholds in Ireland are
- €42,500 for services and
- €85,000 for goods
To avail of the higher registration threshold, at least 90% of your sales [€76,500] must be from the sale of goods. Looking at the services threshold, that’s a monthly sales figure of €3,542. If you are breaching that number on a continuous basis, then you should register for VAT.
You need to look at your turnover over any 12 months on a continuous basis. That doesn’t have to be your accounting period. The issue for Revenue is where businesses should be VAT registered, and they’re not. Say you have a small consultancy business, and your sales number was €60,000 for 2024. You complete your 2024 accounts and tax return in 2025. You still don’t register for VAT in 2025 when your sales figure increased to €70,000. Revenue contact you about why you’re not VAT registered in 2026. From memory, the 2024 services threshold was €40,000, so you exceeded that by €20,000. And you exceeded the 2025 threshold by €27,500.
They’ll be looking for the VAT on €60,000 for 2024 and on €70,000 for 2025, which comes to
| 2024 | €60,000/123 x 23 | €11,220 |
| 2025 | €70,000/123 x 23 | €13,089 |
Add some interest and a penalty on top of that, and it’s a whole world of pain
The message is to be mindful of your sales numbers and track these to see if you are breaching the thresholds. Once you know you will be over the thresholds, then it’s VAT registration time for you.
Elect to register
Some businesses can elect to register, and these include
- Farmers
- Fishermen
- Businesses that do not exceed the VAT thresholds
If you elect to register, you will charge VAT on your sales and claim VAT back on your business costs. Any new business is electing to register for VAT. Because they are new, they have no sales, so they haven’t exceeded the threshold. Businesses that are electing to register should be mindful of cancelling their registration. Revenue will seek a repayment of VAT when the amount of VAT reclaimed is higher than the VAT paid. Revenue look back 3 years from the date of ceasing to register.
We had this with a case recently. A client wanted to strike off a company, and Revenue sought a repayment of VAT claimed over VAT paid. The client had to pay it as Revenue wouldn’t allow the strike-off otherwise.
Date of registration
You can’t backdate a date of registration. You can only register for VAT from a current date. Say you apply for VAT registration next week at the start of March. You’ll be registered in March 2026 from a specific date. Your first VAT period will be March April 2026. If you incurred business costs with VAT on those in the Jan/Feb 2026 period, you won’t get that VAT back. That’s because any invoices dated in January or February are not in a VAT period for which you have VAT registration.
This is important for the purchase of large ticket items like vans, machinery, and equipment. If these invoices are dated in March, even before the date you are VAT registered in March, you get the VAT back. The reason is that you have VAT registration for the March April VAT period and can reclaim the VAT for that period. The other side of that is that you must charge VAT on all your sales in that VAT period.
Two-Tier Registration
There is a two-tier VAT registration system in Ireland. These are
- Domestic VAT registration and
- Intra-EU VAT registration
The domestic registration is only for those intending to trade in Ireland. It also works if you intend to trade with a non-EU country. We had a case of this recently where a client who wasn’t registered for VAT needed to register. He supplies services, and his turnover from a new contract would exceed the registration threshold. But the contract was with a London-based company. As he will be supplying services to a non-EU country, a domestic registration is good for him.
If you intend to trade with other countries in the EU, you’ll need an Intra-EU VAT registration. This means that you can buy goods from other EU countries and not suffer VAT. You’d record the transaction in your VAT return. It’s more difficult to get an Intra-EU VAT registration. Revenue will want evidence of trading and information about your customers, and more.
Those who have a domestic registration can apply for an Intra-EU VAT registration at a later date.
Getting VAT registration
Getting VAT registration isn’t straightforward. There has been quite a bit of fraud in this space, so Revenue are very careful before registering a business. There is a detailed application form. Revenue will request more information when they aren’t satisfied that they have enough evidence. When applying for VAT registration, give them any supporting documents to help your case.
We have another client who has a domestic VAT registration after setting up his new business. He did some work for a Pharma company in Dublin. That company wanted to put him on an approved supplier list for other locations in Europe. When they checked his VAT number, it came up in red as invalid. He needed an Intra-EU registration to be set up on their system. He may never supply services to these EU companies. But, at least now, after getting the Intra-EU registration, he’s in a position to supply his services.
In both of those VAT registration cases, we uploaded documents to support the applications. One was a signed contract with a London-based company. The other was a snip showing the client’s domestic VAT number in red and an invoice showing that he had already billed the Dublin pharma company.
VAT Rates
You’ll be aware of the main VAT rates, but there’s no harm in doing a quick skip through them. They are the
- Standard rate 23%
- Reduced rate of 13.5%
- Second reduced rate of 9%
- Zero rate 0% and the
- Livestock rate of 4.8%
Some businesses are exempt from VAT. As a result, they don’t register for VAT [in most cases], don’t charge VAT, and can’t reclaim VAT. These would include doctors, dentists, banks, and insurance companies. You can contrast that with a zero-rated VAT business. A typical zero-rated business would be a food company. They sell their products at zero rate VAT but can reclaim the VAT on their inputs. While there is no VAT on their sales, they are VAT registered, whereas an exempt business isn’t.
The VAT laws outline the VAT rate for different services and products. It can be a tool of government policy to have staple foodstuffs like bread, milk, butter, fruit and meat at 0% VAT. That would contrast with having chocolate, sweets and minerals at 23% VAT. Tax the tasty treats at the highest rate to make them more expensive and act as a disincentive to buy them.
There’s a VAT rates database on the Revenue website that’s very useful. Ours is an accountancy business, so professional services are at the standard rate of VAT of 23%. But we don’t always apply that rate. If there’s anyone from Revenue reading this, we think we are doing everything right!
Our business
For our business, the rate of VAT we charge depends on two things
- where the customer is and
- whether the customer is a business or a private individual
Most of our clients are Irish companies and individuals. We charge VAT, as normal, at the standard rate of 23% to these customers. VAT-registered businesses will reclaim the VAT we charge to them in their VAT return. The individuals and exempt businesses, like doctors and dentists, can’t reclaim the VAT.
We provide a collection agent and non-resident tax return service to several individuals. They are based in the UK, USA, France, Germany, Croatia, Hungary, Australia, New Zealand and Brunei. We charge VAT at 23% to individuals based in the EU. There is no VAT on our services to the individuals outside the EU.
For business clients based outside of Ireland, there is no VAT, whether in the EU or outside of it. This is a 0% sale, and the business customer must self-account for VAT on their side. However, we need to check where the business customer is established and verify their VAT number. If supplying a service to a UK-based company, we’d get their UK VAT number, check that and put it on our invoice. It would be the same for an EU-based business customer.
VAT Returns
Most businesses will have bi-monthly VAT returns to file with Revenue. The calendar tax year is divided into six bi-monthly VAT periods
- Jan/Feb
- Mar/April
- May/June
- July/Aug
- Sept/Oct
- Nov/Dec
If you are filing a paper return, the due date is the 19th of the month following the end of the VAT period. So it would be the 19th of March 2026 for the January February 2026 VAT return. I don’t know anyone who files paper returns. It is the 23rd of March 2026 for those who file on ROS. The payment date is also the 19th or 23rd. Filing and paying late can incur interest and penalties.
Some businesses can have different VAT periods once authorised by Revenue. These are
- Four-monthly returns, if your annual VAT liability is between €3,001 and €14,000, and
- Six-monthly returns, if your annual VAT liability is €3,000 or less
VAT 3
Your VAT return is called a VAT 3. In its most simple form, you enter the VAT on your sales and deduct the VAT from your purchases. After doing that, you either have a VAT liability or a VAT refund. There is also an EU element to the VAT 3 if you are supplying goods or services to EU countries or receiving goods or services from EU countries.
Another element of the VAT return is a box called Postponed Accounting. This came in as a result of Brexit. If you are buying goods from outside the EU, including mainland UK but not Northern Ireland, you’d pay VAT at the point of entry. You’d get a customs invoice from your shipping company with a VAT charge on it. You would reclaim that VAT charge in your return. To get rid of the cashflow disadvantage and to make things simpler, a VAT-registered business doesn’t pay the VAT at the point of entry anymore. They account for it through postponed accounting.
All businesses that were VAT registered at the time of Brexit were automatically in this new system. New businesses registered since then must apply for it.
Revenue will check refunds, especially larger ones, and will look for backup invoices and other information. It would be very common for a Revenue check for a newly registered VAT business in a refund position.
Summary
This is a whistlestop tour to give you some VAT tips around the basic elements of VAT. From the registration thresholds to VAT returns and the types of registrations, there’s plenty to get your head around. The key to having a very efficient VAT return process is good-quality paperwork. Tools like DEXT are a great help, where you store all your invoices in the cloud, and those are easily accessible. You, your accountant, or Revenue may want them, and you don’t have to go digging through files in sheds. They are all available at the touch of a button.
A cloud accountancy tool like Xero is brilliant for invoicing, once set up right. You don’t want to be one of those doing super work and not invoicing customers. Owed loads of money, but you won’t get paid until you issue the invoice.
Looking at the amount of information about VAT, we’ll do a VAT tips follow-up blog soon. You’ll want to know what you can get VAT back on and what traps to avoid, too. After all my exciting VAT talk, I almost forgot the song
No income tax, no VAT
No money back, no guarantee,
Black or white, rich or poor
We’ll cut prices at a straw
Do you know the tv comedy series? If you do, you’re not in your 20s or 30s!
Fed up with doing VAT returns and want to take that pain away. If so, start here
