For many businesses moving to Ireland, especially I.T. companies, a considerable amount of research and planning into our tax regime is usually carried out in advance. From experience, however, the question these companies rarely ask themselves is “what are the key VAT issues affecting our company if we locate to Ireland?
The current Irish VAT rules are as follows:
• The place of supply for businesses established in the E.U. who provide electronically supplied services to private consumers within the E.U. is the E.U. member state in which the supplier is established. For example, if an I.T. company established in Ireland supplies digital materials via the market to a private consumer living in France, the place of supply will be Ireland and the Irish business will be liable to charge and account for VAT @ 23%.
• The general rule for B2B transactions is that the place of supply of an electronically supplied service is the E.U. member state in which the business customer is established. In this situation the customer must account for VAT under the “Reverse Charge Rule.”
• For B2B transactions where the supply of electronically supplied services is made to a Business Customer outside the E.U. there are no VAT implications.
• For businesses established in the E.U. to a non-taxable consumer outside the E.U., the place of supply of electronically supplied services is where that person usually resides or has a permanent address.
• For businesses established outside the E.U. to a private, non-taxable consumer within the E.U., the place of supply of electronically supplied services is where the consumer normally resides. For example, if a U.S. based business supplies software material via the market to an Irish consumer, then the place of supply will be in Ireland.
What does that mean to the Supplier or I.T. Business/Company?
The supplier of these services will be obliged to register and account for VAT in every E.U. member state in which they have private, non-taxable customers. There is, however, a “Special Scheme” where non E.U. businesses need only register in one E.U. state.