Irish Revenue Commissioners have introduced Postponed Accounting arrangements for VAT registered businesses in Ireland that acquire goods from countries outside of the EU VAT area after 31 December 2020.
In simplified terms, Postponed Accounting means the importer does not pay import VAT when the goods arrive at the Irish port or airport: the VAT is deferred. This was introduced to alleviate cash-flow issues that could arise following the departure of the UK from the EU where VAT registered businesses might otherwise have to pay import VAT at the point of importation of goods and then recover the VAT when they file their next VAT return.
Postponed Accounting enables a VAT registered business to self-account for VAT on imports through their VAT return so that import VAT may, subject to the usual rules on deductibility, be reclaimed at the same time as it is declared on a VAT return. In other words, this permits a straightforward reverse charge transaction, without the need to pay the import VAT at the point of importation.
The VAT return has been amended to include an additional box (PA1) to capture the value of goods imported under Postponed Accounting. The VAT is then accounted for at T1 and T2 (subject to the usual rules of deductibility).
The VAT Return of Trading Details (RTD) has also been amended to include additional fields/boxes: PA2, PA3 & PA4 to capture the value of goods imported under Postponed Accounting.
To use Postponed Accounting a company must be registered for Customs & Excise in Ireland and specific codes must be inserted on the customs declarations.
As part of the July 2020 Stimulus Package the Minister of Finance announced a six-month reduction in the standard VAT rate from 1 September 2020 to 28 February 2021. The VAT rate was reduced from 23% to 21% for this period. It was recently confirmed by the Minister that the reduction will not be extended and the VAT rate will return to 23% on 1 March 2021.
Businesses should ensure their invoicing system is updated to ensure the correct VAT rate is applied from 1 March 2021. Any credit notes issued should show the VAT rate at the rate in force at the time of supply.
Irish Revenue requires all VAT registered businesses to submit a VAT Return of Trading Details (RTD) on an annual basis, following the end of the accounting period. Where a business is registered for Corporation Tax, an annual RTD is required for the 12-month period based on the business’ accounting period for Corporation Tax.
The RTD is a statistical return summarising all supplies of goods and services, imports, and purchases giving rise to deductible input VAT at the various rates. The return includes all Irish, intra-EU, and non-EU trade carried out by the Irish business. The values included on the return are VAT exclusive and all turnover, including turnover at the exempt or zero rate, must be included in the return.
Because of the temporary reduction of the VAT rate from 23% to 21% on 1 September 2020, Irish Revenue has had to update the RTD form to capture information accurately. Since 10 February 2021 the revised RTD is available and the filing date of the RTD has been extended to 10 March 2021.
Irish Revenue issued eBrief No. 010/21 that provides an update of the guidance note “Temporary VAT Measures relating to Covid-19” to include the VAT treatment applicable to the supply of COVID-19 vaccines and testing kits.
The update outlines that following a request from the Minister for Finance, Irish Revenue now permits the application of the zero rate of VAT on the supply of COVID-19 vaccines, the supply of COVID-19 in-vitro diagnostic medical devices (testing kits), and services closely linked to both.
To qualify for the zero rate, COVID -19 vaccines must be authorised by the EU Commission or by the State and COVID-19 test kits must conform with the essential requirements of all relevant European Medical Device Directives.
The zero rate will apply from 12 December 2020 until the enactment of Finance Bill 2021 (expected near the end of 2021).
Bryan Beirne
bbeirne@bdo.ie