VAT Return for Received Services

[Indigo]

Hi,

I recently registered for VAT due to receiving services from outside of Ireland. I’m a sole trader whose business is producing digital products that are sold through a retailer who collects and pays VAT on the sales. What’s paid to me is net of VAT.

My understanding is that, due to place of supply rules, I have to account for the VAT on these received services. My question is, can I also claim this VAT back (reverse charge) since the products I produce are ultimately taxable?

While I did meet with an accountant to discuss this and income tax returns, the sentiment ‘Revenue will never know’ cropped up on a few issues, and I didn’t feel comfortable continuing with them.

I have an appointment with another accountant but, due to the time of year, they’re not available until after my first VAT return is due.

 

[dublin67]

Yes, you are correct. Any services that you receive from abroad, regardless of whether they are inside or outside the E.U., are deemed to be supplied by you. In english this means that you treat this a sale, charge vat at the appropriate rate (usually 23%), and then take a deduction (or input credit) for the vat you have charged yourself. The boxes on the vat return are T1 and T2. The reclaim assumes that you are entitled to reclaim the vat subject to the normal vat recovery rules. On your vat return there are also boxes E1, E2, ES1 and ES2 which relate to purchases and sales of goods/services to and from other EU countries and this will need to be completed.

If you are looking at the Revenue website a purchase from within the E.U. is called an intra-community acquisition and a sale to within the European Union is called an intra-community supply. An export, does not have its normal meaning, and is a sale to outside the European Union. An import is a purchase from outside the European Union.

 

[Indigo]

Thank you, I really appreciate the clarification and the explanation of those terms.

The question of whether I am entitled to reclaim the vat still has me a little unsure given I don't actually handle the vat on my products. What I supply is ultimately taxable to the final consumer though, so not exempt, which seems to be the important thing.

 

[Jim2007]

While I did meet with an accountant to discuss this and income tax returns, the sentiment ‘Revenue will never know’ cropped up on a few issues, and I didn’t feel comfortable continuing with them.

A wise move the last thing anyone needs is an iffy advisor!

 

[dublin67]

As a general rule of thumb you can reclaim any Irish vat that you are charged that relates to your business. The main items for which you cannot reclaim Vat are petrol, vat on purchase of cars, accommodation, food & drink and personal services. There may be others but I can't recall. When I was training these used to be called the seven deadly sins, and even then it wasn't very exciting. If you are in doubt you can always not reclaim the vat on a specific item that you are unsure about and mentioned it to your new accountant when you meet him/her. You have four years in which to reclaim vat on purchases/inputs and it does not need to be reclaimed in the period in which the vat was incurred.