VAT on Services
The position in respect of VAT on services is complicated and depends on the particular service involved. The position is dealt with in detail in other sections of this website.
Under both Irish and UK legislation, VAT is usually charged in “place of supply”. The starting point is that this is where the supplier is established. However “place of supply” is an artificial concept which does carry its ordinary meaning in many contexts. For example for B2B supplies the place of supply is usually deemed to be where the recipient is established.
The UK proposes to adopt an identical system of VAT to the present the European Union system upon Brexit. It has already passed the necessary laws. The laws may diverge in the future.
The UK government indicates in its No Deal Notes that particular arrangements may be required respect of transactions and imports between Ireland and Northern Ireland.
For immediate practical purposes, what is set out below in relation to the position between Ireland and the UK under EU/Irish VAT law is likely to apply in the exactly corresponding way under UK VAT law where the transaction is reversed.
VAT on services applies generally where a VAT registered provider (or a provider who should be VAT registered because it exceeds the relevant annual turnover threshold) supplies a service.VAT may also apply in another country where the services are provided there, in which cases the home country (Irish) provider may need to register for VAT in the country of supply.
The rules are different depending on whether the supply of the service is made to a business or a non-business/consumer and whether it is made to a business or non-business consumer based or established inside the EU or to one based or established outside European Union.
Supplies within EU
At present where a service is supplied by an Irish service provider to a VAT registered business established in another EU state (the UK at present but not after Brexit) there is no VAT chargeable in Ireland. The business recipient of the service must effectively charge itself VAT and account for VAT to its revenue authority. If that business can reclaim VAT on its purchases, the process may involve a simultaneous charge by the recipient and an offsetting credit for the input into the business.
There is no registration threshold for received services. If a business receives services from abroad for business purposes (both from the European Union (EU) and outside the EU), it usually has to register and account for the Value-Added Tax (VAT) in the State. In these circumstances, it is regarded as the supplier of the services for VAT purposes; there is a deemed self-supply.
At present where a service provider provide services to a non-business/consumer in another EU state VAT is generally charged in Ireland. VAT is not usually charged in the other EU state. There are exception. In some cases, the home state provider may have to register and account for VAT in that State.
Equally the Irish consumer/non-business recipient of a service generally pays VAT in the EU state in which the service provider is established. Once again the provider in the other EU state may be obliged to register an account for VAT in Ireland in respect of certain types of services.
In each of the above circumstances the position applies in reverse. Where a service is provided by an EU supplier to a business in Ireland, VAT arises in Ireland. The Irish trader itself accounts for VAT and they used to claim it as a credit. There is no VAT in the state where the supplier is established.
Post Brexit B2B
After Brexit, UK will be treated as a third country for EU VAT purposes so the following treatment which applies to non-EU supplies of services either inwards or outwards will apply. Equally the UK VAT rules will be the same in each particular case as those applicable to a transaction with a non-EU (now non-UK) supplier, customer or consumer. Ireland will be a third country for UK VAT purposes.
After Brexit the general position will be that where an Irish business provide services to a business customer in the United Kingdom, VAT will not be chargeable in Ireland.Under the corresponding VAT legislation in United Kingdom VAT would be chargeable in the United Kingdom to the business recepient.
This would be similar in substance for many purposes to the present position.Irish service providers at present obtain the VAT registration number of the business recipient in the other EU state. After Brexit of other evidence of the presence and business status in th UK will be required. This may initially be the UK VAT number.
Equally in the case of a supply by a UK supplier to an Irish business the general position is that VAT will be charged in Ireland and must be accounted for by the business customer / recepient of the service. Once again, there is no registration threshold for received services
Post Brexit B2C
After Brexit, where an Irish business provides services to a private person/consumer in United Kingdom, VAT may or may not be chargeable in Ireland (or the UK) depending on the nature of the service. The default position in that VAT is chargeable in the state where the supplier is established, but there are exceptions
Equally, in the case the supply of services by a UK (Non-EU) supplier to an Irish non-business customer/consumer the default position is that VAT is not generally chargeable in Ireland. There are exceptions. Once again the trader may be obliged to must register for VAT in the recepients, even as a non-established trader.
There are specific rules for certain types of goods and services which change the general treatment. Broadly speaking where services have a significant connection with or are used and enjoyed in the state of receipt, VAT may be chargeable there.