VAT Implications of Cross Border Supplies of Goods

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| Lisa Cosgrave

In order to determine whether the VAT treatment, the place of supply rules need to be considered. In this case assume goods are being supplied to Ireland, EU and Northern Ireland.

Supplies to Business Customers

IRELAND

In this case, it is goods that are being supplied. The place of supply rules for goods is outlined in Section 29VATCA2010. In accordance with Section 29(1)(c) VATCA2010 where goods are not dispatched or transported (i.e., they remain in Ireland), the place of supply is where the goods are physically located at the time of supply. Therefore, in this case Ireland and Irish VAT will be charged at the appropriate rate outlined in Section 46 VATCA2010.

EU & NI

In accordance with Section 29(1)(a) VATCA2010, “In the case of goods dispatched or transported and to which section 30 does not apply, subject to subsection (2), the place where the dispatch or transportation to the person to whom the goods are supplied begins”. Therefore, for B2B supplies within the EU, the place of supply is Ireland. I have put these in red above as Northern Ireland continues to be treated as an EU Member State with regard to VAT on goods. Where goods are dispatched to persons registered for VAT in other EU Member States, this is referred to as an “Intra Community dispatch” or “Intra Community supply” (as opposed to exports which are to countries outside the EU). The rate of VAT applicable to goods that are dispatched from Ireland to customers who are registered for VAT in other EU Member States is 0% (see Paragraph 1 of Schedule 2 VATCA10) if certain conditions are met. These are set out in Regulation 29 of the 2010 VAT Regulations, and in “Quick Fixes outlined below, as follows:

 

  1. The customer must be VAT registered in the other EU Member State. The supplier is required to obtain the customer’s VAT number (including the country prefix, for example the country prefix for Irish VAT numbers is IE, the country prefix for Portuguese VAT registrations is PT and the country prefix for Northern Ireland VAT registrations is XI) in advance of or at the time of the supply and must quote this VAT number on the face of the VAT invoice issued to the customer.
  2. The goods must be dispatched from Ireland to the other EU Member State within 3 months from the date of the supply.
  3. The supplier must retain commercial documentation which:


i) confirms that the goods in question were supplied to a person registered for VAT in another EU Member State and

ii) clearly identifies —

(a)the supplier,

(b)the customer,

(c)the goods and the value of those goods,

(d)the consignor (if different from the supplier),

(e)the method of consignment and

(f)the destination of the goods.

 

4. The VAT “Quick Fixes” requirements for zero-rating (which were introduced across the EU with effect from 1 January 2020) must be satisfied in respect of the supply. Among other matters, the “Quick Fixes” set out requirements regarding the dispatch evidence that a supplier should hold to support zero-rating the supply, ensuring the customer is VAT registered outside the country of dispatch and correctly recording the supply on the supplier’s VAT Information Exchange Statement (VIES).

VIES statements are statistical VAT returns that would also need to be filed.

The customer then self-accounts for VAT at their domestic rate applicable.

In order for an Irish supplier to be considered to be issuing a valid VAT invoice for the provision of reverse charge services to a business recipient in another EU Member State, the supplier is required to:

(i) state the customer’s VAT number on the face of the invoice, and

(ii) indicate on the face of the invoice that the “reverse charge” VAT rules apply.

 

Supplies to Private Customers

IRELAND

As per the above, where goods are not dispatched or transported (i.e., they remain in Ireland), the place of supply is where the goods are physically located at the time of supply. Therefore, subject to Irish VAT at the appropriate rate.

EU & NI:

The place of supply differs where the supply is made to non-VAT registered persons. In accordance with Section 30 VATCA2010, in the case of an intra-Community distance sale of goods, the place where the goods are located when the dispatch or transport of the goods to the customer ends. Therefore, the place of supply is where the customer is located so for example Spain. This means its outside the scope of Irish VAT, the invoices would not be zero rated. 

Where the cross-border sales within the EU exceeds €10,000 per calendar year there is a requirement to register and account for local VAT in the EU member state in which the goods are shipped. To avoid triggering an obligation to register for VAT in each EU Member State where the goods are delivered, the VAT due on sales to consumers in Member States in which the seller does not have a VAT establishment can be remitted through a single EU-wide VAT return known as the One Stop Shop (“OSS”). The OSS is not compulsory, it is an optional scheme. However, where a business opts into using the OSS, it must be used for all relevant supplies within the scope of the scheme.

Where however the sales do not exceed the €10,000 within the EU, they can charge Irish VAT at the normal rate that applies so in this case 13.5%. They can however opt to register for the OSS and account for foreign VAT if they wish.

So ultimately:

If sales are less than €10,000 – Irish VAT (optional to register for OSS or in each member state)

If sales are more than €10,000 – OSS or register in each member state.

UK & REST OF WORLD

Whether goods are exported to non-EU business customers or non-EU private individuals, the place of supply is deemed to be Ireland (see s29(1)(a) VATCA10). The VAT rate applicable to the export is 0% (see Paragraph 3 of Schedule 2 VATCA10) i.e., the supply is “zero-rated”.

There is no requirement to put a narrative on the invoice, however we would advise putting wording such as ‘outside the scope of Irish VAT – supply to third country’ on the invoice. The Revenue may ask a trader to verify (i.e., provide evidence) that the zero-rated goods have left Ireland and been exported. Therefore, it is important that the trader retains sufficient evidence that the goods have in fact been exported. The legislation does not specify what constitutes “evidence” of export to a non-EU country. Such evidence will usually include a cargo bill of lading, a cargo manifest, evidence of payment from abroad, contract for sale, etc. In the absence of evidence that the goods have been exported, a Revenue official may contend that the goods have never left Ireland. Instead of allowing the trader to apply the 0% VAT rate, the Revenue would require the trader to apply the VAT rate appropriate as if the goods were sold within the country (e.g.,23% etc). Evidence of export is therefore very important.

For more information on this topic, please click here or the course image below.

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.

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About the Author

Lisa is a key member of our tax technical support team, providing advice on all tax heads in response to queries submitted. In addition, she provides support within the tax department on company/business valuations, tax planning, restructuring and exit planning solutions for a range of clients, liquidations, and company secretarial issues. She also has experience in financial reporting and audit. A Chartered Certified Accountant and Chartered Tax Advisor, Lisa trained and worked in practice for six years prior to joining OmniPro, where she gained experience in financial reporting, tax compliance across all tax heads and audit. She has experience with a range of small and medium sized businesses assisting them with their financial reporting obligations and tax compliance across all areas

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