If you are already trading, you are probably wondering if you have to register for VAT.
As a general rule, you have to register for VAT in Ireland if you supply goods or services in the country and you exceed the annual turnover thresholds. However, you can do so voluntarily even if you don’t reach these thresholds.
What Are the VAT thresholds?
You have to look at the value of your total sales in a specified period of time. For distance sales, like e-commerce store, your turnover in the calendar year will be taken into account. For the remaining types of sales, the threshold is established on the basis of sales in any continuous 12-month period.
The below turnover thresholds relate to the majority of cases:
- €37,500 for supplying services only
- €75,000 for supplying goods only
- €75,000 for supplying both goods and services, where 90% or more of sales relate to goods
- €41,000 for making purchases from other EU member countries.
Every business owner needs to estimate their total value of sales in the 12-month period and register for VAT even before the threshold has been reached. The fact that you are likely to exceed the threshold is enough to create the obligation to register.
Can you choose to register for VAT?
The answer is YES. Even if you don’t reach the specified annual threshold you can choose to register for VAT.
There are many benefits of electing to register for VAT. One of the biggest is reclaiming VAT on your purchases. Practically it means that the Revenue Office will give you back the VAT portion of expenses which relate to your business, like rent, utilities, vehicle fuel, office supplies, equipment, etc.
This is very important for every business, especially in the early stages of existence. Getting this money back may have a big impact on the cash flow. If you have started a new business but have no sales yet, you may choose to register for VAT and get back the VAT paid on start-up expenses.
One of the biggest benefits of voluntary VAT registration is reclaiming VAT on your purchases.
How to register for VAT?
The registration process is quite simple and everything happens online. You can do it yourself if you have an active ROS account with the Revenue Office or your accountant or tax agent may do it for you. Sometimes the process may take a while as the Revenue Office may wish to check if the business activity is actually established in Ireland. This is a standard procedure to prevent VAT frauds.
From what date the VAT registration is effective?
The important fact is that you cannot back date the VAT registration. It can only be effective from the date agreed between you and the Revenue Office once the application process is completed successfully.
After the registration process is completed you will get a confirmation letter from the Revenue specifying the effective date of your VAT registration and giving you a unique VAT registration number.
What are the filing obligations?
As a VAT registered business, you will need to file periodic VAT returns with the Revenue online services. The filing period in Ireland is every 2 months and the return must be submitted by 19th day of the month following the tax period. If a VAT payment is due, it must be made at the time when the return is filed. If a refund is due, the Revenue will send the payment to your specified bank account within a few days, usually.
If the filing deadline is missed Revenue may impose penalties or late payment interest. It is wise to use the assistance of your accountant to file your VAT returns efficiently and timely.
The registration process is quite simple and everything can be done online.
What expenses qualify for VAT refunds?
In general, the majority of business related purchases will qualify for VAT refund if you are a VAT registered person or company. You must keep a valid VAT invoice or receipt to support every expense you claim. From time to time the Revenue Office may perform a review and ask you to provide copies of relevant invoices.
There are some exceptions as to what expenses qualify for a VAT refund. The below costs are not eligible:
- Food, drink, or other personal expenses for you or your employees
- Accommodation, except for certain qualifying conferences
- Entertainment expenses
- Passenger motor vehicles, with some exceptions
- Petrol (only VAT on diesel fuel can be reclaimed)
Are you still unsure if you should register for VAT?
If you have any doubts whatsoever, we will be able to advise you on the best option for your business.
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