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Are you a business owner in Ireland looking to understand the VAT system? Look no further, as we'll guide you through the process of charging VAT in Ireland. As of 2023, the standard VAT rate stands at 23% and it's important to know how to properly add this tax to your goods and services in the supply chain. We'll walk you through the procedure for charging VAT in Ireland in this blog.
While charging VAT in Ireland can seem complex, our easy-to-follow guide simplifies the process in a few simple steps. Read on to ensure VAT compliance and avoid confusion. If you're worrying about how to calculate VAT on Products, use our handy Vat Calculator to calculate vat efficiently and accurately.
Step 1: Determine the type of supply
Finding out what kind of supply you are producing is the first step in Ireland when it comes to charging VAT. In Ireland, there are two categories of goods: standard-rated goods and exempt goods. The standard rate of 23% of VAT is applied on standard-rated supplies. On the other hand, exempt supplies are exempt from VAT.
If you sell products or services that are subject to VAT (tax), you must register your business with the government's tax collection agency in Ireland. This can be done online using the Revenue Online Service (ROS).
Once you are registered, you will be given a unique VAT number that you must include on all of your invoices that include VAT.
For example, if you own a small bakery that sells cakes, you must register for VAT. Once registered, you'll receive a VAT number and you'll need to include this number on all of your invoices that show the VAT you charged for each cake sold.
Step 3: Calculate the VAT chargeable
To figure out how much VAT you need to charge on each sale, you must multiply the cost of the item or service before VAT by the standard VAT rate.
For instance, let's say you own a bookstore and you are selling a book for €20. To find out how much VAT you should charge, you would multiply €20 by the standard VAT rate of 23%. So, the VAT charge would be €4.60 (€20 x 0.23).
So, when you sell the book, you would charge a total of €24.60 (€20 + €4.60 VAT). And, this is the amount you would include on your invoice to the customer.
Step 4: Issue VAT invoices
When you make a standard-rated supply, you must issue a VAT invoice to your customer. To comply with tax regulations and be eligible to recoup the VAT paid on business expenses, it is crucial to issue VAT invoices accurately.
For record-keeping purposes, VAT invoices must be provided no later than 30 days after the date of supply and maintained for at least 6 years.
VAT invoices must include the following information:
Step 5: Keep accurate & exact records
It's important to keep accurate records of all your VAT transactions, including VAT invoices issued and VAT returns submitted. These documents must be kept for a minimum of six years. In order to prevent any potential problems, it is crucial to maintain the correctness of your VAT records and to routinely examine and update them.
Inaccurate VAT records may result in:
Step 6: Submit VAT returns and pay VAT owed
Once you have determined the amount of VAT that was applied to your products and services, you must report the results to the Irish Revenue. This document, known as a VAT return, must be submitted on a regular basis (usually monthly or quarterly). The following details should be included in the VAT return:
Let’s understand this with a simple example. Suppose your company produced €10,000 in standard-rated sales and collected €2,300 in VAT, you would report these transactions on your VAT return and pay the €2,300 in unpaid VAT to the Irish Revenue.