Our view on recent updates from Irish Revenue and EU Commission

Irish Revenue Updates

eRCT Bulk Rate Review (Revenue eBrief No. 162/18)

RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries. RCT rates vary among 0%, 20% and 35%. In early September 2018, Revenue have scheduled a periodic Bulk Rate Review (BRR) of all live subcontractors in the eRCT system, except those with a rate end date that has not yet passed.

The criteria used for determining the RCT deduction rate mainly includes accuracy of record keeping, tax compliance record of the subcontractor, payment of taxes, interest and penalties and supply of information as requested by Revenue.

Following the automated review, a number of changes to the RCT rates for existing subcontractors are likely to be made by Revenue. Both the subcontractors’ concerned and the relevant principals will be notified of the new RCT deduction rate applicable.

The Deloitte Indirect Tax team has significant experience in dealing with compliance obligations, Revenue interventions, appeals and submissions with respect to RCT. If your RCT rate changes as a result of the bulk review or if you have any questions regarding RCT, please contact Alan Kilmartin.

VAT on Services Connected with Immovable Property (Revenue eBrief No. 142/18)

The Revenue Tax and Duty Manual has been updated to include the existing guidance from Revenue’s VAT Information Leaflet “Services Connected with Immovable Property” which primarily deals with the place of supply rules for services connected with immovable property.

According to Irish VAT legislation, if the supply of services is connected with immovable property, or is the grant of a right to use the property, the place of supply is where the property is located. This specific rule only applies where the services supplied are directly related to a specific property. Revenue have provided further clarification and guidance on what constitutes as “directly related” to a specific property.

It states that a service is regarded as having a sufficiently direct connection with immovable property when the services are derived from an immovable property and that property makes up a constituent element of the service and is central to, and essential for, the services supplied or where they are provided to, or directed towards, an immovable property, having as their object the legal or physical alteration of that property.

The update, published in July 2018, also deals specifically with the supply of equipment. In cases where equipment is put at the disposal of a customer with a view to carrying out work on immovable property, that transaction shall only be a supply of services connected with immovable property if the supplier assumes responsibility for carrying out the work. In this way, a supplier who provides the customer with equipment, along with sufficient staff for its operation, with a view to carrying out work shall be presumed to have assumed responsibility for the execution of that work (the presumption that the supplier has the responsibility for the execution of the work may be rebutted by any relevant means in fact or law).
Although there are a number of other issues discussed in the recent update, there has been no other material changes in Revenue’s position on the matter. The list of examples of services deemed to be connected and not connected to immovable property have been re-worded in a number of instances so it may be worth reviewing the updated guidance if you have relied on Revenue’s previously published guidance on the matter.

The Deloitte Indirect Tax team has extensive experience dealing with VAT treatment applicable to services connected with immovable property. To find out more on this topic, please contact Alan Kilmartin, Donal Kennedy or John Stewart.

VAT and VRT on Transactions Involving Motor Vehicles (eBrief No. 150/18)

The updated Revenue Tax and Duty Manual now includes information previously contained in the “VAT and VRT on Transactions Involving Motor Vehicles” information leaflet. The new manuals now deal separately with VAT and VRT on transactions involving motor vehicles, partial recovery of VAT on qualifying passenger motor vehicles and recovery of VAT on motor vehicles. Overall, there has been no material changes in Revenue’s position on the VAT treatment of these issues.

VRT and VAT on transactions involving motor vehicles is a complex and technical matter and the Deloitte Indirect Tax team has considerable expertise dealing with VAT and VRT issues relating to motor vehicles. For any queries, please contact Jim Nolan.

VAT on Property – Big Swing for Transitional Properties (eBrief No. 150/18)

The content related to the Capital Goods Scheme (“CGS”) previously included on the Revenue website which deals with guidance on the Big Swing for transitional properties, is now included in the Capital Goods Scheme section of the VAT Tax and Duty Manual. There has been no technical or operational changes to the guidance, the location of the content has just been reorganised.

The Deloitte VAT team has extensive experience dealing with VAT issues arising on property transactions. If you require any assistance on this, please contact Donal Kennedy, John Stewart or Christopher Connolly.

EU Commission Updates

EU VAT fraud: Agreement on measures to boost administrative cooperation and adoption of new tools to combat fraud in the EU

In June 2018, the European Council agreed on short-term measures aimed at strengthening administrative cooperation in order to aid the prevention of VAT fraud. The proposed regulation addresses the most widespread forms of cross-border fraud such as ‘missing trader’ or 'carousel' fraud (where supplies are purchased and resold without payment of VAT), fraud in the trade of used automobiles and the fraudulent abuse of a scheme for VAT-free imports of goods.

The regulation is aimed at improving the exchange and analysis of information shared by the member states’ tax administrations and with law enforcement bodies of Member States. There are also proposed changes for strengthening Eurofisc - a network of national tax officials primarily focused on the exchange of information on VAT fraud.

Member States will take advantage of IT systems in order to share VAT information more efficiently as well as sharing intelligence across EU enforcement bodies on serious fraud cases perpetrated by organised crime gangs.

EU VAT minimum standard rate set permanently at 15%

The European Council has adopted a directive to make the 15% minimum standard rate a permanent feature of the new EU VAT system. This measure is aimed at preventing excessive divergences in VAT rates in the member states which will help eliminate the risk of distortions of competition through lower VAT rates that would otherwise have an adverse impact on cross-border trade.

A 15% minimum standard rate has been maintained on a provisional basis since VAT rules for the EU single market were first applied in 1993. It was last extended in May 2016 for two years, expiring on 31 December 2017. This recent directive is evidence of another proposal aimed at replacing the current ‘transitional’ VAT arrangements with a definitive VAT system and reforming VAT rates currently under discussion at EU level.

VAT fraud: EU approves cooperation agreement with Norway

The EU Council has approved an agreement with Norway aimed at boosting cooperation in the area of VAT. The agreement provides EU member states and Norway with a legal framework for administrative cooperation in preventing VAT fraud and assisting each other in the recovery of VAT claims.

The agreement follows the same structure that is currently used for cooperation between the EU's member states. It provides for the same instruments, such as electronic platforms and e-forms. Norway is the first country with which the EU has an agreement in this field.

The Deloitte Indirect tax team has considerable expertise on the EU VAT rules and up-to-date knowledge on latest changes in the EU VAT legislation. If you require any assistance on this topic please contact Donal Kennedy, Alan Kilmartin or Richard McDaid.

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