VAT

VAT Information, Planning and Compliance
Value Added Tax (VAT) is an indirect government tax, charged on the supply of goods and services. Output VAT arises on the sale of goods & services and is collected by the business, on behalf of the Government. Input VAT arises on the purchase of good & services, and may or may not be deductible / refundable. VAT is a transaction-based tax, and arises at each stage of the supply chain although some goods and services are VAT-exempt, with generally no right of recovery for input VAT.

Business which supply Zero-rated Goods (including exporters) & Services are entitled to reclaim VAT on inputs, with all other goods and services are liable to VAT at varying rates. There are also specific rules in relation to international trading and exports.

Disclaimer: Always contact a professional before proceeding with a transaction.

VAT Planning & Compliance
As Value Added Taxes is collected in over 100 countries worldwide, it is very important to control tax compliance issues, in order to minimize the costs and any penalties. Careful tax planning is required to ensure that the optimum VAT structure is designed and implemented. The implications for business, which may make VAT errors by either underpaying or over-claiming VAT, can be serious as it may lead to an exposure to interest charges and penalties.

We can advise on both local and international VAT compliance issues and provide the following services to optimise VAT planning opportunities.

• Design & implement VAT plans to minimise VAT liabilities.
• System development.
• Compliance advice and support.
• Staff training on VAT bookkeeping.
• Analysis of the effect of tax changes.
• Advice on the VAT implications of transactions.
• Vat compliance including VAT registration, liability payment and filing returns.
• Audit preparation & advice.
• Liasing with the tax authorities.
• Review of your VAT structure to optimise VAT saving opportunities.
• VAT Compliance / Administration efficiencies.
• Identify areas of exposure in relation to VAT.

VAT Legislation
The principal pieces of Irish legislation governing the value added tax system are as follows:
- Value Added Tax Act 1972 (Principal Act)
- Value Added Tax (Amendment) Act 1978
- Value Added Tax Regulations

While there is some Irish case law on VAT including decisions by the Appeal Commissioners, judgments from the European Court of Justice (ECJ) take precedence and are binding on all EU Member States.

European Union Directives
The EU Council issues VAT Directives to the Member States and the Member States must modify their VAT legislation accordingly. EU law takes precedence in the event of an inconsistency. The most important Directives are the Sixth, Seventh and Eight VAT Directives and the Second Simplification Directive.

How is VAT charged?
Value added tax is chargeable on the supply of goods and services within the State by a taxable person in the course or furtherance of any business carried on by him, and on goods imported into the State from outside the EU. VAT is also chargeable on the intra-Community acquisition of goods by VAT registered persons and on the intra-Community acquisition of new means of transport such as motor vehicles, boats etc. by either a registered or unregistered person. The amount on which VAT is chargeable is the total consideration, which the person supplying goods or services becomes entitled to receive. Taxable persons account for VAT on their outputs and they are allowed credit against this liability for tax borne on business purchases and other inputs as evidenced by correctly prepared VAT invoices.

Taxable persons (generally, people or corporate entities in business) must be registered with the Revenue Commissioners for VAT purposes where the amount of their annual turnover (i.e. the amount of receipts excluding VAT) from the supplies of taxable goods and services exceeds or is likely to exceed certain limits. A detailed definition of "taxable person" is included in Section 8 of the Value Added Tax Act 1972 as amended.

Farmers, sea fishermen and traders whose turnover is below these limits are not generally obliged to register for VAT, but they may do so if they wish.

When is VAT not deductible?
No deduction is allowed in respect of tax paid on expenditure on the following:

(a) The provision of food, drink, accommodation or other personal services supplied to the taxable person, his agent, or his employees.

(b) Entertainment expenses incurred by the taxable person, his agent or his employees.

(c) The acquisitions, hiring or leasing of motor vehicles other than as stock in trade or for the purposes of a business, which consists in whole or part of the hiring of motor vehicles or for use in a driving school business for giving instruction.

(d) The purchase of petrol otherwise than as stock in trade.

(e) Expenditure incurred on food, drink, accommodation or other entertainment services, as part of an advertising service is not deductible in the hands of the person providing that advertising service.

(f) Any VAT incurred by a taxable person in a transaction where the margin or auction schemes apply.