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.
In accordance with Circular 230 Disclosure
Since founding Accounts Advice Centre in Dublin in 1996, Claire McNamara has established a reputation for successfully advising businesses, corporate and personal tax clients. Her knowledge spans various sectors and her experience includes corporate transactions, inheritance tax planning, International Tax Treaties, personal tax as well as advising on issues affecting non domiciled individuals and offshore clients. She constantly delivers a value added service and efficient tax management solutions to high net worth private clients, property owners, executives, entrepreneurs, entertainers and members of various professions.
As a Chartered Tax Adviser, Claire has considerable experience in professional practice and will personally help you to deal with all your tax affairs competently, professionally and successfully. She has also lectured extensively in taxation on courses for the main professional accountancy qualifications including A.C.C.A., A.C.A. and C.P.A. and is actively involved in preparing students for the Irish Tax Institute’s CTA qualification.
Claire has effectively handled a number of Revenue Audits and Appeals on behalf of her diverse client base and has successfully negotiated solutions resulting in substantial differences to the eventual tax liability, surcharge and penalties.
5 comments on “VAT Consequences For I.T. Companies In Ireland – Part I”
Hi Claire,
It is worth noting that it is not just the last category (i.e. non EU based suppliers) supplying to consumers in the EU who could end up with multiple VAT registrations in the EU.
The general rules you outline above for an Irish based supplier supplying B2B and B2C within Europe are correct – but there is a significant change coming with effect from 1 Jan 2015 in relation to B2C supplies for those supplying electronically supplied services, broadcasting and telecommunications services. Whereas the place of supply is currently Ireland for such an established supplier, this is going to change to the place where the unregistered consumer is based, and the applicable VAT rate will be the rate in force for such supplies in that member state. Using your example above of the Irish established supplier of electronically supplied services with a customer who is a private consumer in France, although currently Irish VAT at 23% must be accounted for in relation to such a sale, from 1/1/15 French TVA at 20% will have to be accounted for…
There is a simplification system being put in place for business which is optional, but which if adopted will ensure that such businesses do not end up with multiple VAT registrations in every member state where it has unregistered customers who are consumers – it is referred to as the “Mini One Stop Shop”
or MOSS for short.
Suppliers who are going to be affected by the change in the place of supply rules referred to above can choose one member state/ jurisdiction and register for VAT there. By filing a single special “MOSS” return in that member state of election the supplier will be able to file and account for all his EU sales for every member state where he has consumer customers, thus satisfying all of his VAT compliance obligations “in one fell swoop” as it were!
Regards
Gerry Brennan
VAT Director
Mazars
Dublin
Hi Gerry
Many thanks for your comments.
My VAT blog has been divided into five parts and the points you’ve outlined above will be outlined in the rest of my blogs which will be posted on Tuesday, Wednesday, Thursday and Friday of this week.
By the way congratulations on an excellent presentation on 6th March in the Hilton Hotel – it was very interesting and informative.
Kind Regards
Claire McNamara
Claire,
I didn’t realise and I didn’t mean to steal your thunder – my apologies! Thank you for you kind comments on my ITI presentation – I’m glad you enjoyed it.
Best regards
Gerry
Hi Gerry
No problem at all.
Although you know you’ve just ruined the punchline don’t you!!
I look forward to your next presentation – I really picked up some valuable points at the last one.
Best Wishes
Claire
Genuinely sorry – wasn’t my intention!
I have to say I enjoyed presenting and don’t get to do enough of it – time is the enemy!
Best regards
Gerry
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