Acquisitions from EU – Brexit

Overview

The intra-Community supply and acquisition of goods occurs where goods are dispatched or transported between businesses in different Member States of the European Union (EU). For Value-Added Tax (VAT) purposes, two transactions are deemed to have occurred:

intra-Community acquisition (ICA)
and
intra-Community supply (ICS).

This section is concerned with the treatment of the ICA of goods. An ICA refers to the acquisition of moveable goods by a business in one Member State from a business in another Member State of the EU. In these transactions it is the purchaser that is required to self account for the VAT as if he or she had made the supply themselves.

This section explains:

what self accounting for VAT is
what information you must provide to Revenue on your ICAs
when you are required to register for VAT because of your ICAs
when you must account for VAT on branch to branch transfers
what VIES and Intrastat returns are
what happens when you purchase a new means of transport from another EU Member State.

Next: Self accounting for VATu

Self accounting for VAT

Under intra-Community acquisition (ICA) rules the purchaser is required to self account on a reverse charge basis. This means that the business customer must account for Value-Added Tax (VAT) on the purchase of goods from other Member States.

The supplier in the other Member State is considered to have made an intra-Community supply (ICS).

Under this system:

the supply is zero-rated in the Member State of dispatch as an ICS.
the purchaser is liable for VAT on the acquisition of the goods.
the purchaser must account for the VAT in their VAT return. The rate applicable is the rate of VAT which applies in their own Member State.
if they are entitled to an input credit for the VAT payable on the ICA, this is reclaimed in the same VAT return,
and
the purchaser must account for VAT on any subsequent supply of the goods.

Example

A trader in Ireland purchases goods in January 2016 costing €5,000 from a company in Germany. The goods were purchased for the purposes of their taxable supplies. The German company does not charge VAT on the intra-Community supply to Ireland as the conditions for the zero rate in Germany have been met.

The Irish trader must charge themselves VAT at the rate applicable in Ireland, for example VAT of €1,150 (5,000 at 23%) at the standard rate. However, the Irish trader can claim an input credit of €1,150 as the goods were purchased for their taxable supplies, assuming the purchase is deductible for VAT purposes.

Two taxable events have occurred:

1) the intra-Community supply at the zero rate for which the supplier in Germany is responsible

2) the intra-Community acquisition at the appropriate rate in Ireland for which the purchaser is responsible.

Irish trader’s VAT 3 return January/February 2016
Type of VAT liability	Total deductible
T1 (VAT on sales)	€1,150
T2 (VAT on purchases)	€1,150
T3 (VAT payable)	Nil
T4 (VAT repayable)	Nil
E1 (value of goods sent to other EU countries)	Nil
E2 (value of goods received from other EU countries)	€5,000

When the Irish trader sells the goods on, VAT is chargeable to their customers at 23% and paid over to Revenue in the relevant VAT returns in the normal course.

Next: What information on your ICAs must you submit to Revenue?

Published: 03 October 2018

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