By Inesa Murasovaite, Financial Accountant at Gallagher Keane Chartered Accountants.

Navigating the world of Value Added Tax (VAT) is a fundamental aspect of business operations worldwide. While the concept of VAT seems straightforward – adding tax to goods and services – the reality is often more complex. Businesses face challenges in determining the correct VAT rates, ensuring compliance, and managing the administrative burden of filing VAT returns.

This guide aims to demystify VAT for companies, offering practical solutions to streamline processes and alleviate the burden associated with VAT management.

What is Value Added Tax (VAT)?

VAT is a consumption tax levied on the value added to goods and services at each stage of production and distribution. In essence, it is a tax paid by consumers on specific goods and services, reflecting the incremental value added at each stage of production.

In Ireland and the European Union, VAT is applied to goods and services sold or consumed within the EU. However, there are exemptions and special provisions for certain transactions, such as exports and intra-community trade.

Standard Rate of VAT in Ireland

The standard VAT rate in Ireland is 23%. This rate applies to the majority of goods and services, including consultancy, legal services, furniture, and vehicles.

Reduced VAT Rates

Ireland offers reduced VAT rates on certain goods and services to provide tax relief or stimulate specific sectors. As of January 1, 2024, the reduced VAT rate in Ireland is 13.5%. Revenue Ireland provides a listof reduced-rate items, including:

• Hot take-away food, tea, and coffee
• Culture includes cinemas, theatres, some musical performances, art galleries, exhibitions, and amusement parks or fairgrounds
• Catering services and restaurant supplies (but not alcohol, soft drinks, or bottled water)
• Repair services
• Hairdressing services
• Cleaning, maintenance, and some building services
• Certain fuels

• Tour guide services

The list is long, but worth a look if you aren’t sure which VAT rate applies to you.    Additionally, Ireland has a second reduced rate of 9%, currently applicable to electricity and domestic gas supplies.

Zero Rate of VAT

Certain goods and services in Ireland are subject to a zero rate of VAT. While no VAT is charged on these items, businesses can still claim credit for VAT paid on their purchases. Goods and services with the zero rate of VAT in Ireland include:

• Exports
• Intra-community trade with VAT-registered persons in other EU member states.
• Some medicine and sanitary products (oral & non-oral medicine, medical equipment
• Certain books, e-books, newspapers, audiobooks
• Children’s clothes (under 11 years old)
• Solar panel supply and installation for schools and private homes

VAT Exemptions

Some goods and services are exempt from VAT in Ireland, meaning they are outside the scope of VAT regulations. Examples of VAT-exempt items include educational, medical, and financial services, as well as postal services, healthcare, and cultural activities.

International VAT Rates

VAT rates vary globally, with each country implementing its own system. While Ireland’s standard VAT rate is 23%, other countries have different rates, ranging from 5% to 20%. Understanding international VAT rates is essential for businesses engaged in cross-border transactions.

Filing VAT Returns

Businesses in Ireland are required to file VAT returns periodically, reporting the VAT collected on sales and reclaiming VAT paid on purchases. VAT returns are typically due bi-monthly, with deadlines set by the tax authorities.

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