VAT Rate Change
From 1 March 2021, the standard rate of VAT has increased to 23% from 21%. This is a reversal of the temporary reduction as part of Covid 19 measures back in September 2020.
The standard VAT rate applies to a wide range of goods and services such as professional services, telecommunications and non- essential food stuff and represents circa 50% of transactions in Ireland. The temporary reduction in the standard rate did not impact supplies which qualify for a reduced VAT rate such as activities in the tourism and hospitality sector for example hotel meals and accommodation, hairdressing and construction works.
As set out below, there are a number of factors to be taken into account in determining whether the 23% or 21 % VAT rate applies to a supply of goods or services:
- In the case of transactions with other VAT registered persons, a person accounting for VAT on the sales or invoice basis must apply the VAT rate in force at the time they issue or are obliged to issue an invoice.
- Persons accounting for VAT on the cash receipts basis who are required to issue a VAT invoice to another VAT registered person should show the VAT rate which applies on the date of the supply, not on the date of receipt of payment.
- Goods or services which are actually supplied to consumers/unregistered persons from 1 March 2021 are taxable at the 23% rate.
- Goods or services supplied to unregistered persons during the period 01 September 2020 – 28 February 2021 are taxable at 21% even if they are invoiced after 1 March 2021
- Any VAT credit note or debit note relating to a supply of goods or services which contains a VAT adjustment and which is issued to a VAT registered person, a public body or a business carrying on a VAT exempt activity should show VAT at the rate in force at the time the original invoice was issued.
- Any VAT credit note or debit note relating to a supply of goods or services to a consumer on or after the 1 September 2020 should show or include VAT at the rate in force at the time of the supply.
If the goods or services are supplied on or after 1 March 2020, any advance payments, including deposits, received from VAT-registered persons can be categorised as follows:
- Suppliers who account for VAT on an invoice basis: the appropriate VAT rate is the rate in force at the time the invoice relating to the advance payment is issued, or ought to have been issued, whichever is the earlier.
- Suppliers who account for VAT on a cash receipts basis: the appropriate VAT rate is the rate in force at the time of the advance payment.
- An advance payment received from an unregistered person is subject to VAT by reference to the rate in force at the time of the advance payment.