VAT Rates in Ireland
Ireland has opted for the reduced VAT rates on a number of items allowed by the VAT Directive.
Irish VAT Rates by goods and services
The standard VAT rate is 23%. The standard VAT rate generally applies for all goods and services for which no exemption, 0% or one of the reduced VAT rates is foreseen.
The first reduced VAT rate is 13.5%. This reduced rate applies to electricity, restaurants and catering, repair, cleaning and maintenance services, construction, among others.
In addition, there is a reduced VAT rate of 9%. This reduced rate applies, in general, to magazines and newspapers, both paper and electronic versions, entry to sporting events, hairdressing and tourism, among others.
Supplies and services at 0% are the standard supplies, such as exports or intra-Community supplies, as well as books, most foodstuff, oral medicines, children's clothing and footwear, among others.
Finally, some supplies are VAT exempt, such as postal services, financial and insurance transactions and immovable property rental.
For a precise confirmation of the VAT rate applicable to your product or service in Ireland, we recommend that you contact us.
VAT Deduction Limits in Ireland
Input VAT is generally deductible as long as the goods or services are used for business purposes.
However, certain expenses are subject to special rules:
- Food, drink or other personal services to the taxpayer, agents or employees: input VAT is not deductible, unless they are part of a taxable supply of services.
- Food, drink, accommodation or other entertainment services, where it forms all or part of the cost of providing advertising services are not deductible.
- Hotel accommodation: input VAT is not generally deductible, unless this refers to qualifying accommodation in connection with attendance at a qualifying conference. A qualifying conference means the supply to a delegate of a service consisting of the letting of immovable goods or accommodation for a maximum period starting from the night prior to the date on which the qualifying conference commences and ending on the date on which the qualifying conference concludes. Input VAT is 100%, however, where a delegate attends for only part of the duration of the conference, entitlement to deduct the VAT incurred on the accommodation is reduced accordingly.
- Business entertainment: input VAT is generally not deductible.
- Passenger motor vehicles: input VAT is generally not deductible, unless this refers to vehicles used as stock in trade. Also, if the expense refers to qualifying vehicles, input VAT deduction up to a 20% is allowed. A qualifying vehicle shall be a vehicle that is used for at least 60% business purposes (for a period of 2 years or more) and either i) was first registered for Vehicle Registration Tax (VRT) purposes on or after 1 January 2009 up to 31 December 2020 and has CO2 emissions of less than 156g/km (i.e. CO2 emission bands A, B and C) or ii) was first registered for Vehicle Registration Tax (VRT) purposes on or after 1 January 2021 and has CO2 emissions of less than 140g/km (i.e. CO2 emission bands A and B).
- Attendance to qualifying conferences, fairs and exhibitions: input VAT is 100% deductible.
- Petrol: input VAT is not deductible.
- Cars, vans and trucks cost: the deduction of input VAT is restricted, particularly when it comes to vehicles for mixed use. We recommend check the guidelines in detail.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
You may have a look at the official information from the Irish tax website on VAT deduction limits.
Statute of Limitations in Ireland
The statute of limitations is four years in Ireland. However, there is no time limit in cases of fraud or neglect.
The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests.
The statute of limitations also determines the period a taxpayer can voluntarily correct any errors on past submissions, as well as deduct input VAT. This is four years. A valid VAT invoice or customs document is required to claim for input VAT refund.
You can find an overview of the statute of limitations in Europe under the following link.
Tax point rules in Ireland
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: When the supply of goods or services is subject to the mandatory issuance of an invoice, then the tax point is by the of issuing the invoice. If you have not issued an invoice, then VAT is due by the time of the supply of the goods or services, or by the time a prepayments or advanced payment is received.
- Continuous supplies of utilities (gas, electricity and telecommunications): Tax point is considered to have occurred when the utility company issues the bill to the customer.
- Intra-Community acquisitions and supplies: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier.
- Import: Tax point occurs when the goods are imported according to the relevant import documents.
Find here official information about when VAT is due in Ireland. Find also here the rules for services taxable at the rate of the goods.
Use and enjoyment rules in Ireland
When it comes to establishing the place of supply of a transaction, Member states may deviate from the general rules for B2B and B2C services according to the place where the services have been used and enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules), to avoid non-taxation (negative use and enjoyment rules), or both.
Use and enjoyment rules locating the transaction in Ireland:
- Hiring of movable goods by a non-EU business (B2B) is subject to taxation where those goods are used and enjoyed, therefore in Ireland if that was the case.
- Banking, financial and insurance services supplied by an Irish taxable person to a final customer (B2C) established outside the EU are subject to taxation where those goods are used and enjoyed, therefore in Ireland if that was the case.
- Money transfer intermediary services supplies to an Irish taxable person (B2B), and are use and enjoyed in Ireland
- Telecommunication services B2C.
Use and enjoyment rules locating the transaction outside Ireland: Hiring of means of transport to a taxable person (B2B) is subject to taxation where the service is used and enjoyed, and therefore, outside the EU if the customer is an Irish business.
Find official information about use and enjoyment rules in Ireland.
Irish Bad Debt Relief
Bad debt refers to an unpaid invoice for which the Supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer. This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.
Bad debt relief refers to the possibility of recovering the VAT from that invoice. Ireland allows for bad debt relief, unless for taxpayers under the cash accounting scheme.
Bad debt relief is done by adjusting the output VAT paid in the periodic VAT return, i.e., by increasing the VAT on purchases figure in Box T2 on the VAT return form.
Before proceeding with the bad debt relief, it is required that the supplier has carried out reasonable steps to obtain the payment of the debt.
- Actions taken include correspondence with the debtor, referral of the issue to a solicitor or a debt collection agency or other action undertaken which results in objective evidence that the trader is in a position to reasonably consider that the debt is bad.
- Suppliers are required to retain evidence of action taken, including all correspondence, in attempting to recover the debt
Find here the official information about bad debt relief in Ireland, as well as the official guidance available to download.
