Zero Rated VAT – Why a Customer May Request Their Invoices to Be Zero Rated.

Cover Image for Zero Rated VAT – Why a Customer May Request Their Invoices to Be Zero Rated.

| Lisa Cosgrave

Usually, it will be the case that the customer will have Section 56 Authorisation which is common in many industries, particularly with large exporters but if you have new clients or don’t see it very often. Section 56 of the Value-Added Tax Consolidation Act 2010 provides for a supplier to zero rate the supply of qualifying goods and services to certain authorised persons. It also provides that those authorised persons can apply the zero rate of tax when acquiring goods and services from other Member states, where obliged to account for VAT on the receipt of those supplies, and on importing goods from Non-EU Countries.

In general, the accountable persons who qualify are those primarily engaged (i.e. 75% or more of their turnover) in making zero-rated intra-Community supplies of goods, in making zero-rated exports of goods to non-EU countries (referred to as 'exports' in this document) and in making supplies of certain contract work, so that the VAT on those supplies, if any, would be payable outside the State. These persons would not normally be in a VAT payable position in the State in any given VAT period i.e. they are always in a VAT repayable position.

On receipt of the authorisation, the rate of VAT applying to goods and services supplied to that authorised person, provided they are qualifying goods and services is the zero rate. Qualifying goods and services, for the purposes of these provisions, are all goods and services other than the following:

(i) The supply or hire of any passenger motor vehicle.

(ii) The supply of petrol.

(iii) The provision of food, drink, accommodation (other than qualifying accommodation in connection with attendance at a qualifying conference), entertainment or other personal services.

It is essential that a copy of the authorisation is provided to the supplier (Form 56B), as failure to do so may result in VAT being incorrectly charged. However, the supplier will be obliged to charge VAT under the normal VAT rules in the absence of receiving the authorisation. Where VAT is charged in those cases, an authorised person will be unable to reclaim the VAT from Revenue and will instead have to rectify the matter with their supplier. This will require the supplier to issue a credit note cancelling the original invoice and issuing a new invoice applying the zero rate of VAT. There is an exception to the above on low-value purchases, as Revenue so recognise the administrative burden to operate the facility. Therefore, there is an exception where the VAT on an invoice issued is less than €40. The exception allows the authorised persons to reclaim this VAT on their VAT returns as normal subject to the normal deductibility rules.

Suppliers, once they have received a copy of an authorisation from an authorised person, must apply the zero-rate of VAT to all qualifying supplies to the authorised person from the effective date of the authorisation and must quote the authorisation number on VAT invoices issued in respect of such supplies. If there is any doubt in relation to an authorisation, the Revenue Division which issued the authorisation should be contacted to confirm its validity. The supplier when making zero-rated supplies under the scheme, should ensure that the supply is being made to the person named on the authorisation. Particular attention should also be paid to the period during which the authorisation has effect, as zero-rating applies only during the period of validity of the authorisation.

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. The information at the time of publishing was accurate and could be subject to final changes.

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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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