VAT Planning
Significant changes to EU VAT law became effective under Irish VAT law from 1 January 2010.
The changes are likely to impact on most businesses to some degree and relate to:
· Who should account for VAT in respect of the supply of services,
· Cross border VAT refund procedures, and
· New VAT compliance requirements.
Who should account for VAT in respect of the supply of services?
Generally VAT is charged in the jurisdiction where the supplier of a service is established, and the service provider accounts for the VAT charged. However, this is subject to a number of exceptions, including where the service consists of various professional services from abroad. In many of these exceptions, the onus is on the service recipient to self account for VAT under what is known as the reverse charge basis.
The new legislation significantly expands the scope of services where the recipient must self account for VAT. In effect, all cross border ‘business to business’ services should fall under the scope of the reverse charge basis, with the exception of certain specific categories of services.
Cross border VAT refund procedures
Up until 31 December 2009 where an Irish business incurred VAT in another EU jurisdiction, the business may have recovered the VAT incurred by making a claim directly to the tax authorities in the other EU jurisdiction. However this procedure was often slow and costly.
The old procedure has been replaced by a new system whereby claims by Irish businesses will be made directly to the Irish Revenue by submitting an electronic tax return. In addition, the existing six month time limit for such refund claims is being extended to nine months.
New VAT compliance requirements
You may be familiar with VIES requirements whereby a return should be filed on a quarterly basis where a VAT registered business supplies goods to a VAT registered business in another EU jurisdiction.
With effect from 1 January 2010, if an Irish business supplies any services that are subject to the reverse charge basis to VAT registered customers based in other EU jurisdictions, details of such sales should also be submitted in the VIES return.
The changes to the place of supply rules for services are likely to have significant consequences for many businesses. The changes to the cross border refund procedures are to be welcomed and should simplify matters in this area. The VIES changes are likely to result in an increased administrative burden and may require changes to your company’s reporting procedures.
Experience shows that VAT is often the most significant tax cost issue for many organisations, not only for businesses but also for the public sector and other not for profit organisations. Indeed Revenue investigations and Revenue audits of VAT compliance often result in large settlements payable.
At FGS we provide VAT planning services on a wide range of issues which include:
- VAT on all property transactions including leases
- VAT on imports/exports of goods or services
- Applying the correct rate of VAT
- Ensuring you maximise recovery VAT on expenditure
- VAT legislation relating to specific sectors including financial services.
Expertise
FGS has vast expertise in the complex area of VAT, and we advise and assist individuals and companies with planning for their VAT obligations.
Besides advising on VAT obligations and systems, we also have experience with the VAT aspects of particularly complex or unusual transactions.
This helps to mitigate tax exposure – and to achieve VAT and administrative savings where possible.
FGS can also advise on implementing strategic plans to fit in with the commercial aspects of your operations to ensure full VAT recovery and compliance. We review all our clients’ transactions to identify any opportunities available to save VAT.
Other VAT issues
VAT issues can be particularly complex in property transactions, and for not for profit organisations, charities, sporting bodies and clubs. Taking advice early will ensure that VAT is properly calculated and the scope for savings is identified.
It is also important that clients have systems in place to ensure they can administer their VAT compliance in a cost-effective manner.
Related links
For information on related services to VAT planning, read about: