Irish VAT registrations – key changes introduced

On 14 June 2019, Irish Revenue published eBrief No. 114/19 (available here). It outlined that the ‘Guidelines for VAT Registration’ in Tax and Duty Manual have been updated to reflect the introduction of significant changes to the Irish VAT registration process.

What has changed?

With effect from 15 June 2019, a 'two-tier' concept now applies to Irish VAT registrations; 'domestic-only’ or ‘intra-EU’ status. Some other EU countries, such as Spain, also take a similar approach.

Domestic only status

Irish Revenue’s guidance states that taxpayers who are not undertaking any intra-EU trade should apply for ‘domestic-only’ status. That being the case, it would seem that taxpayers who trade solely with domestic and / or non-EU business partners will only require this type of VAT registration.

A simplified registration process will be available for applicants applying for the ‘domestic-only’ status.

Such registration numbers will not appear as valid on the European Commission’s online database. Furthermore, the format of domestic only registration numbers will be the same as registrations which hold intra-EU status. We would expect that this will give rise to some practical difficulties when businesses are engaging with business partners both home and abroad.

If you register for domestic-only purposes, and subsequently wish to engage in intra-EU trade, you will be required to submit an application to obtain such status. 

Intra-EU status

Taxpayers applying for ‘intra-EU’ status, which will also cover domestic activity, will be required to provide additional information on their VAT registration application form. In particular, there appears to be an increased focus on the due diligence process. Taxpayers will be aware that there have been numerous case-law rulings regarding fraud and due diligence in favour of the taxpayers over the past number of years. Further information on this matter can be found here.

Irish Revenue's published guidelines on the updated VAT registration process state that having 'intra-EU' status will result in an automatic VIES reporting obligation. If this is applied in practice, and indeed to all those currently registered for Irish VAT, it will add to the compliance burden faced by taxpayers. While only outbound supplies need to be recorded on periodic VIES statements, any taxpayer registered with 'intra-EU' status will face an automatic VIES registration.

Irish Revenue’s published guidelines do not confirm whether taxpayers can choose to de-register for VIES in the instance where the taxpayer only receives inbound supplies, and does not make any outbound supplies. This matter should be considered by businesses, in particular by those merely receiving supplies from abroad, on the basis that it is unlikely that such businesses will be making any outbound supplies, and therefore should not be required to register for VIES reporting.

The updated guidelines and ROS registration process erroneously refers to the cross-border supply of services as being zero-rated and also ignores that an 'in business' test is applied to cross-border supplies of services. For reference, the general rule in relation to the cross-border supply of business-to-business services is that the place of supply is the place where the recipient is established, and the recipient must account for VAT due on the ‘reverse charge’ basis. The test for determining the applicable VAT regime is normally determined by whether the recipient is engaged in economic activity rather than whether they are registered for VAT or not.

Given that Irish Revenue has been urging taxpayers to apply for Economic Operators’ Registration and Identification (EORI) numbers in light of Brexit uncertainties, the timing of these changes is interesting.

Although an EORI number is only required for taxpayers who trade with non-EU countries, given the unknown outcome of the Brexit negotiations, Revenue are encouraging taxpayers who solely engage in domestic and EU trade to register for EORI. That being so, it is unusual that Revenue has introduced the option to register for the ‘domestic-only’ VAT registration.

Will the changes affect existing VAT registrations?

Revenue have stated that all taxpayers currently registered for Irish VAT will be automatically treated as having 'intra-EU' status. There is no need for such taxpayers to contact Revenue.

It is currently unclear whether taxpayers with live VAT registrations granted prior to the implementation of the two-tier registration process will also receive an automatic VIES registration.

Should you have any queries on this article’s contents or would like our assistance with dealing with any taxation issue, please feel free to contact us.