When it comes to VAT (valued-added tax), there’s a few different ways of handling it dependent on what and where you’re aiming to sell.

Approaches will differ depending on who your customer base is:

• business (B2B)
• consumer (B2C)

…and whether you’re selling a service or goods, alongside where you’re selling to.

Let’s look at what happens when the geographical location changes or stays the same.

Sales within the Republic of Ireland

In this scenario – where a business supplies goods or services to a separate business or consumer within Ireland – VAT should be charged at the appropriate rate for the good or service provided.

The standard VAT rate in Ireland is 23 percent, however certain goods and services may be subjected to lower rates.

Sales to the EU (outside Ireland)

The appropriate rate of VAT on sales to customers in the EU depends on whether it is a B2C or a B2B transaction.

You’ll need to establish this at the point of sale and – where B2B – request the customer’s VAT registration number (which should be quoted on the invoice). Otherwise, the sale should be treated as a B2C sale.

Selling in B2C

For B2C sales, Irish VAT should be charged on goods where the total value sold to EU countries outside Ireland – is less than €10k p.a. After this figure, you’re required to register for VAT in the target sales countries (yes, that means all EU countries you are selling in to!).  You will be charging VAT at the local EU rate and remitting this to the relevant EU country. There’s an option to register for the One Stop Shop model – which facilitates reporting and submitting non Irish VAT to the Irish Revenue authorities. This avoids the need for registrations in multiple countries.

Where the B2C sale relates to services, the Irish VAT rate will apply.

Selling in B2B

For B2B sales of goods and services, the rate of VAT applied is zero percent and is processed under the reverse charge mechanism in the customer’s base country. This means that your customer will have to self-declare the VAT in their home country. You – as the supplier – will need to verify that the customer is VAT registered as referred to above.

Sales outside the EU

Generally speaking, no VAT is charged on sales to countries outside the EU. However, your customer may be liable to VAT at point of entry or under a reverse charge mechanism, depending on the country.

The Brexit Issue

Given that many businesses have an established link to UK and Northern Ireland customers, Brexit has thrown a big spanner in the works when it comes to overseas trading.

Northern Ireland

• Currently regarded as part of the EU for VAT purposes so the rules applying to EU sales can be adopted here.
• There may be changes to this down the road but that’s as much a political decision as it is a commercial one.

UK – more complex

• If you’re selling services into the UK on a B2B basis – no VAT applies, however you must retain evidence on file that the services were supplied to an address outside the EU.
• If you’re selling services on a B2C basis – Irish VAT applies.

The bad news? If you’re selling goods to consumers in the UK, you must register for VAT in the UK.  There’s no threshold below which you don’t have to do this.

The alternative loophole? Use the services of an Online Market Place such as Amazon or eBay. You’ll be regarded as selling B2B, so no VAT will apply. The Online Market Place charges the VAT on their onward sale to the end customer. The only catch is you’ll most likely be charged a fee for this service by the Online Market Place.

What about Imports?  

When you import goods a customs declaration will arise. This shows the taxable value of the import and the amount of VAT and other duties charged at the point of entry or, in respect of the VAT, pending completion of your VAT return.  Obviously, where the goods are from within the EU and the purchase is B2B – there will be no VAT charge as referred to above.

Ultimately, VAT can be one of the most complex areas of business tax, so don’t stress yourself if it’s taking a minute to get your head around it. Luckily, we’re here to help!

For more information on how to navigate the world of VAT or any other services you think we can assist with, don’t hesitate to get in touch.