| | | | | | | | | | | TAX PLANNING TIPS
| | | | VAT on Cross-border Transactions within the EU | | | Supplying goods and services to another EU State
The place of supply determines where VAT is charged and hence what rate of VAT is applied. The following place of supply rules apply generally to goods (subject to some exceptions):
· General rule is where goods are located at time of supply;
· Goods which are transported – place where the transport begins;
· Goods which are installed or assembled – place of installation or assembly;
· Distance sales (supplies to private consumers) – place where transportation ends once certain thresholds are exceeded (otherwise where the transport begins).
The general place of supply rules for services are:
· Services supplied to VAT registered business customers – place where the customer is established;
· Services supplied to non VAT registered customers – place where the supplier is established.
The VAT implications of intra-Community supplies of goods and services can become complicated when supplies are warehoused, transported, processed, installed or assembled, bought and resold between various member states, as more tax points arise and VAT rules vary between countries.
Receiving goods and services from another EU State
The current EU destination approach for paying VAT on cross-border activities is that VAT arises on the good or service in the country where it is consumed. Generally this places the responsibility of accounting for VAT on the person receiving the good or service. For example, if a company in Ireland receives a professional legal service from abroad, the Irish company is obliged to register for VAT and account for VAT on its Irish VAT return, claiming a credit for the VAT paid on the same VAT return, known as Reverse Charge VAT or self accounting for VAT.
VAT benefits of having an Irish Agent in the EU
Irish VAT law allows a foreign principal to operate in Ireland through an agent. This enables the agent to manage the administrative burden of reclaiming VAT on behalf of its principal. Most supplies of services by agents to their principals can be zero-rated for VAT.
The Irish agent can either be disclosed of undisclosed to the customer. If we assume the agent is undisclosed, the customer understands that they are dealing with a principal and not an agent. The place of supply of the goods or services to the customer is where the underlying transaction takes place, which can be abroad in many cases. The agent is deemed to have received and supplied those services itself. The agent must issue an invoice to its customers and the rate of VAT will be the rate applied to the underlying transaction.
Conclusion
VAT advice needs to be tailored to each situation, advice should be sought before transactions and agreements are entered into, to avoid unnecessary VAT costs and remain compliant with EU VAT law. | | | | Should you require any assistance in relation to this matter please email me here | | | | | | | | | | | |
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