Business to Business Sales in the EU
In the case of supplies to other EU states, broadly similar principles to those applicable in the United Kingdom at present, apply. In almost all circumstances, supplies of both goods and services to a VAT registered business in another EU state, are exempt from VAT in Ireland.
The business recipient of the goods or services accounts for VAT in its state. Although the supply is exempt in Ireland, the trader/business may nonetheless recover VAT on all its purchases for the purpose of such supply.
There are VAT simplifications available for businesses with a relatively small turnover or in particular sectors where immediate cash payment is the norm.
There are obligations to make returns of EU sales and statistical returns the purpose of making the EU wide system function.
Consumer Sales in the EU
The position in relation to supplies to consumers in other states differs from that which applies to businesses. Below a certain threshold, VAT is charged in Ireland on consumer sales in other EU states.
In the case of distance sales and in certain other circumstances, the Irish established trader may be obliged to register in the particular EU state when its turnover/sales to non-businesses/number entities in that state exceed the turnover threshold for that state. For example, the distance selling threshold into the United Kingdom is £70,000 per annum at present.
In the case of non-distance sales to private consumers and to non-VAT registered businesses undertaken from within another EU state there is an immediate obligation to register and account for VAT in that state
Supply of Services in the EU
The rules on VAT are similar to the EU-based rules now applicable in the United Kingdom. The broad principle is that when services are provided in one EU state to a business recipient in another EU state which is VAT registered, the business customer recipient of the service self-accounts for VAT. The EU based service supplier is entitled to a deduction for purchases in providing the services even though it does not charge VAT on the sale.
The business recipient of the services accounts for VAT in its home state on the so-called reverse charge basis. This involves the simultaneous accounting for VAT and in most cases, taking a credit for an input (purchase) so that there is no cash flow implication. This is usually more favourable than purchasing services locally which will involve an upfront payment of VAT on the services followed by reclaim/credit against VAT liability in the following period.
There are some exceptions to the general rule above, where the services relate to a particualr place, whereby VAT is chargeable by the supplier of the service. They include
- land and property related services which are deemed to take place where the land is physically situated e.g. conveyancing fees surveyors
- certain passenger transport
- services which are physically performed in a particular place
- restaurant and restaurant and catering services
- hire vehicles
There are special rules for digital services supplied to non-VAT registered customers in other EU states.