SHOULD I REGISTER FOR VAT?

Whether you set up a Company or decide to set up as a Sole Trader, you need to consider whether you should register for Valued Added Tax (VAT).

When first considering Vat registration, reclaiming Vat on purchases  springs to mind. But remember Vat must be charged on sales. The difference between these two figures  is payable to Revenue or repayable. Normally Vat on sales (outputs) will exceed Vat on purchases (inputs) so the vast majority of businesses have to pay Vat.The exceptions usually have zero rated sales eg. baker,butchers,fishmongers,greengrocers.  However you may have no choice, as Vat registration is compulsory if annual turnover exceeds the thresholds set out below:

  • Services                     €37,500
  • Supply of Goods     €75,000

If you are setting up a business that has exclusively zero rated sales, it would be advantageous to register to reclaim the Vat on expenses.

Farmers,Government  and other bodies are not required to register for Vat.

Traders engaged in exempt activities are not permitted to charge Vat or reclaim Vat on expenses (eg insurance broker,doctors,dentists)

However the last two categories may be required to register for Vat , in order to account for Vat on services and goods received from suppliers outside Ireland.

Flat rate farmers (A flat-rate farmer is a farmer who is not registered for VAT in respect of his/her farming activities)  should be aware that if  the machinery they purchase elsewhere in the European Union exceeds €41,000, they are obliged to register for Vat in Ireland in respect of EU Acquisitions only. They will still retain their flat rate status in respect of their normal farming activities. They must pay Vat on the cost of the machinery at the standard rate and cannot take the deduction. They can elect to register for Vat. They must also take into account the extra bookkeeping work and form filling that comes with Vat registration.So the costs involved may negate the benefits.

Tillage farmers normally register as the Vat incurred on machinery purchases and  running  costs far outweighs the flat rate addition on sales and the extra bookkeeping costs.

Vat was introduced to Ireland by the European Union in 1972. Consquently Irish Courts decisions can be overruled by the European Court of Appeal.

 Vat is a simple tax but highly complex!

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