How VAT Rate Ireland Affects Businesses: An Overview

VAT is important in Ireland as a source of government revenue and businesses must understand it to follow tax laws and avoid penalties. This blog covers VAT rates, including the standard, reduced, zero-rated, and exempt rates and the reasons for past rate changes. 

It also covers VAT compliance rules such as registration, record-keeping, and reporting, along with the penalties for not following them. The blog will be helpful for businesses, accountants, and anyone interested in VAT in Ireland.

Current standard VAT rate in Ireland

Ireland now has a standard VAT rate of 23%. With few exceptions for reduced rates and zero-rating of specific commodities, this rate is applicable to the majority of the goods and services offered in the nation. 

The government levies a tax known as VAT, which is added to the final cost of products and services and is collected by enterprises. Since 2012, Ireland's standard VAT rate has been 23%. 

Reduced VAT rates and when they can be applied

Certain goods and services in Ireland are subject to lower than the regular rate of 23% reduced VAT rates.

• 9%: This discounted rate is applicable to some food goods like fruit and vegetables as well as items like energy and gas used for home heating and lighting.
• 13.5%: Items including hotel lodging, dining establishments, and hairstyling services are subject to this lower rate.

Zero-rating of certain goods and services

Certain goods and services in Ireland are subject to lower than the regular rate of 23% reduced VAT rates.

• 13.5%: Items including hotel lodging, dining establishments, and hairstyling services are subject to this lower rate.
• 9%: This discounted rate is applicable to some food goods like fruit and vegetables as well as items like energy and gas used for home heating and lighting. Read more about VAT On Services In Ireland.

How VAT is charged on imports and exports

The EU VAT Directive and Irish VAT law provide the rules for Value Added Tax (VAT) in Ireland on imports and exports of goods and services. Use Ireland VAT calculator to calculate vat on imports and exports easily and get accurate result.

For imports

• VAT is charged at the time of importation of goods. The VAT rate is the same as Ireland's standard rate, which is 23% at the moment.
• Similar to domestic services, imported services are subject to VAT. The service recipient must self-report the VAT in Ireland based on the Irish VAT rate if the service provider is headquartered in an EU nation. The service is subject to VAT in Ireland as though it were a domestic supply if the service provider is headquartered outside the EU.

For exports

• In terms of VAT, items exported to non-EU nations are zero-rated, which means no VAT is applied to the purchases.
• Irish VAT does not apply to services that are exported to non-EU nations because they fall outside of its purview.
• Under the "reverse charge" method, services that are exported to other EU nations are subject to VAT in the country where the customer is based.

Effects of VAT on businesses and consumers

1. Companies are required to charge VAT on their purchases, collect VAT from clients, and submit VAT payments to the government. They can also request a refund of the VAT they paid.
2. The VAT that consumers pay for the goods and services they purchase is not refundable. The cost of the goods and services includes VAT, which means that customers pay it without even recognizing it.