VAT Rate Change

From 1 September 2020, the standard rate of VAT will change from 23% to 21%. The rate is due to revert to 23% with effect from 1 March 2021. 

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 reduction in the standard rate will not impact supplies which already qualify for a reduced 13.5% 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:

Invoices

  • 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 prior to 1 September 2020 are taxable at the 23% rate even though they may be invoiced after 1 September 2020.

Credit Notes

  • 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.

Advance Payments

If the goods or services are supplied on or after 1 September 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.