How Ireland’s VAT Regime is Changing

Andrew Decker
January 21, 2021

As a result of Brexit, COVID-19, and the Finance Act 2020, the VAT regime in Ireland has and will continue to undergo numerous changes. Highlights of these changes are outlined below.

  • Postponed Accounting and Reporting Changes
    Beginning in January all taxpayers have the ability to apply postponed VAT accounting to their imports from outside the EU and Northern Ireland. Businesses will have to be suitably registered in order to apply postponed accounting; this means being registered for both VAT and Customs and Excise with the Irish Tax Authorities. Taxpayers can be excluded from the scheme if they do not meet the necessary conditions to apply the relief. This change will allow businesses to account for import VAT on their periodic VAT return instead of paying import VAT to customs at the time of import. With import VAT now being charged on imports of goods from the United Kingdom (excluding Northern Ireland), the introduction of postponed accounting should help ease potential cash-flow issues for businesses not used to dealing with non-EU imports.
    Both the periodic VAT return, the VAT 3, and the annual “Return of Trading Details” form have been amended for 2021 to include new boxes which are to be used to report the value of imports accounted for on the VAT return.
  • Standard Rate of Tax
    As a COVID-19 relief measure the standard rate of VAT in Ireland was reduced to 21%, beginning September 1, 2020. The rate is set to revert to 23% beginning March 1, 2021.
  • 9% supplies until December 31
    In late 2020 the Finance Ministry announced the application of the second reduced rate of 9% to several types of supplies beginning November 1, 2020. Finance Act 2020 amended the VAT Act to account for this reduction of the VAT rate on these supplies and extends the reduction until December 31, 2021. Effected supplies include:

    • Printed material normally subject to the 13.5% reduced rate including maps, print music, and catalogues
    • Promotion and admission to cinematic films, theatrical performances, and musical performances
    • Admissions to fairgrounds, amusement parks, open farms, and art and museum exhibitions
    • Hairdressing services
    • Hotel and holiday accommodations
    • Restaurant and catering services
    • Provision of heated food, including “takeaway” food
  • Permanent Rate Changes on Miscellaneous Supplies
    Finance Act 2020 removes the zero-rate from wax candles and night-lights that are “white and cylindrical” beginning January 1, 2022. Additionally, the reduced rate of 13.5% will apply to sales of menstrual cups, sponges and pants beginning January 1, 2021. Finally, the previous application of the reduced rate to “amusement services” has been replaced with the application of the reduced rate to “[a]dmission to fairgrounds or amusement parks” excluding charges unrelated to the admission. This last change also takes effect on January 1, with the caveat that such admissions are subject to the 9% rate until December 31st, as mentioned above. As a result of this change amusement services provided outside of fairgrounds and amusement parks are now subject to the standard rate of tax.
  • Tax Representative Requirement
    Finance Act 2020 added a new section to the VAT Act which allows the Revenue Commission to require that non-established sellers be required to appoint an EU established Tax Representative who will be liable for the payment of VAT. Sellers will have 21 days from when they receive notice from the Revenue Commission to furnish details of their appointed representative to the Commission or face a €4,000 fine. The requirement for a tax representative does not apply to sellers registered for the special scheme for sellers of electronic services.
  • Other Miscellaneous Changes
    The Finance Act of 2020 made several technical adjustments to the VAT act in order to better align it with the EU VAT Directive. Firstly, the definition of immovable property has been adjusted. Secondly, several changes were made to provisions related to restaurant and catering services. As a result of the second set of changes its important for businesses in the food service industry to review whether they are charging the correct rate of VAT on their supplies. A new Tax and Duty Manual titled “VAT Treatment of Restaurant and Catering Services” was released in late December outlining the revised VAT treatment of such services. Thirdly, the VAT rate applied by flat-rate farmers was increased to 5.6%. Fourthly the zero-rating of supplies of personal protection equipment and other specified medical equipment to health care providers was extended until April 30, 2021 with an automatic extension beyond that date granted if authorized by the EU.

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Author

Andrew Decker

Andrew Decker is a Senior Regulatroy Counsel at Sovos Compliance. Within Sovo’s Regulatory Analysis function, Andrew focuses on international VAT and GST issues and domestic sales tax issues. Andrew received a B.A. in Economics from Bates College and J.D. at Northeastern University School of Law. Andrew is a member of the Massachusetts Bar.
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