Our view on recent updates from Irish Revenue and EU Commission

Finance Act 2017 – VAT Notes for Guidance (Revenue eBrief No. 02/18)

Sunbeds increased VAT rate

Finance Act 2017 included an amendment to the exclusions contained in paragraph 21(1) of Schedule 3 to the VAT Consolidation Act 2010 which relates to goods and services chargeable at the reduced VAT rate (13.5%). The amendment provides that with effective from 1 January 2018, the reduced VAT rate no longer applies to the provision of sunbed services and that the VAT rate applicable to sunbed services is increased from 13.5% to the standard rate of 23%.

Expansion of VAT exemption for educational services

A new subsection (13A) in Section 120, VAT Acts, allows the Revenue Commissioners to make regulations regarding the application of the VAT exemption for relevant vocational training, retraining and educational services for young people. Amendments contained in the Act provide further clarifications and conditions under which providers can qualify for VAT exemption in respect of children’s or young people’s education, school or university education, vocational training or retraining as well as details of VAT exemption on certain services provided by bodies to include Qualifications and Quality Assurance (Education and Training) trainings, courses accredited by approved colleges within the meaning in the tax Consolidation Act 1997, education provided to children and young people by a recognised school within the meaning in the Education Act 1998, specific vocational training or retraining together with the relevant incidental supplies of goods or services and etc.

The Deloitte Indirect tax team has extensive experience dealing with VAT treatment applicable to education services and vocational training. To find out more on this topic, please contact Donal Kennedy, Ted Holohan or John Stewart.

New rules of VAT on electronic commerce adopted by European Commission

As part of the EU's 'digital single market' strategy and in order to achieve both cost saving for businesses and increased tax revenues for the EU Member States, the EU Council is looking to revamp the rules regarding the facilitation of VAT collection for online supplies of goods and services and to simplify the VAT rules for micro-businesses and start-up companies.

Under this new regime, in order to achieve a fairer tax distribution among the EU Member States, VAT on supplies of goods or services provided to EU customers online will be payable to the EU Member State in which the customers are, regardless of where the online retailer is based.

The new rules also aim to reduce the administrative burdens for businesses engaged in B2C supplies in various EU countries by extending the current Mini One-Stop Shop (MOSS) portal to replace the requirement for multiple EU VAT registrations due to breaching distance sales thresholds. Currently businesses are required to register for VAT in every EU Member States in which they make supplies, subject to breaching national thresholds, which can result in significant VAT compliance costs for the businesses and thus could cause a barrier for cross-border trade. The proposed simplified quarterly returns will be filed via the MOSS system and it is expected that administration burdens for companies will be significantly reduced. VAT revenue is also expect to increase by €7 billion for the EU Member States.

Online companies selling goods and/or e-services cross-border, up to €10,000 per annum, would be able to treat these supplies in a similar manner to their domestic sales and therefore apply domestic VAT rules on the sales. It is also expected that SMEs will also benefit from simpler procedures for cross-border sales of up to €100,000.

The European Commission has also taken action against potential VAT fraud from outside the EU. The VAT exemption for small consignments imported into the EU that are worth less than €22 has been removed on the basis that the current system is open to fraud and abuse which leads to distortion of the market and unfair competition for EU businesses.

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

VAT: More flexibility on VAT rates, less red tape for small businesses

As a follow up on one of the 'cornerstones' for a new definitive single EU VAT area proposed in October 2017, the European Commission has proposed new rules to give Member States more control over VAT rates.

In addition to a minimum standard rate of VAT of 15%, EU Member States will be able to introduce two separate reduced rates of between 5% and the standard rate chosen by the Member State; one 0% rate of VAT and one reduced rate set at between 0% and the reduced rates.

The current list of goods and services to which reduced rates can be applied will be replaced by a simpler list of products such as weapons, alcoholic beverages, gambling and tobacco to which the standard rate of 15% or above would always be applied. Member States will also have to ensure that the weighted average VAT rate is at least 12% in order to protect public revenues.

The European Commission also put forward proposals to reduce VAT costs for SMEs by introducing a €2 million revenue threshold across the EU under which small businesses would benefit from simplification measures, a €100,000 turnover threshold which would allow companies operating in more than one Member State to benefit from the VAT exemption and the possibility for EU Member States to free all small businesses that qualify for a VAT exemption from obligations relating to identification, invoicing, accounting or returns.

The above proposals are submitted to the European Parliament and the European Economic and Social Committee for consultation and subsequently to the Council for adoption. Once the switch to the definitive regime effectively takes place, these amendments will become effective.

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

eRCT System - Input of Payment Notifications where the contract is closed (Revenue eBrief No. 01/18)

The eRCT system has been revised to reflect changes for RCT principals, subcontractors and their agents who can now look up payments made or received for any selected 12-month period on ROS and be able to download through ROS the list of payments in an Excel spreadsheet.

The updated system allows principals make a payment notification for a closed contract up to 9 months after the end-date of the contract. However this function will not be available where payment was made more than 9 months after the end-date of the contract and the principal will need to re-open the contract to submit a payment/post payment notification.  For any contract that has been closed and not re-opened for 18 months or longer, no post payment notifications or unreported payment notifications are allowed to be input on that closed contract.

The revised eRCT system also allows a principal to input an unreported payment on a closed contract up to 18 months after the end of the contract. If the payment is made over 18 months after the end of the contract, the principal will need to reopen the contract to submit an unreported payment.

The Deloitte Indirect tax team has significant experience dealing with compliance obligations and submission letters with respect to RCT. If you require any assistance on this topic please contact Alan Kilmartin.

Review of Opinions/Confirmations (Revenue eBrief No. 007/18)

From 1 January 2018, taxpayers who wish to continue to rely on any opinion/confirmation issued by Revenue in the period from 1 January to 31 December 2012 will be required to make an application for it renewal or extension by 30 March 2018. In order to apply for the renewal, evidence of the written opinion/confirmation issued by Revenue and a full application for the renewal/confirmation must be submitted to the relevant Revenue District. The maximum period for which a Revenue opinion/confirmation may be relied upon by taxpayers without being reviewed is 5 years, however subject to Revenue discretion this period may be shortened.

Once a fully compliant application has been submitted to Revenue and provided there has not been a material change in the facts and circumstances that would result the opinion/confirmation cease to have effect, the opinion/confirmation will continue to apply until such time as Revenue has had an opportunity to review the case and if applicable, has issued a written notice of withdrawal or amendment of the opinion/confirmation concerned. The notice will include details of the relevant transactions and the chargeable periods after the issue of such notice.

If an application for renewal or extension of the renewal/confirmation is not made or if an application is not submitted in compliance with the procedures, the opinion/confirmation issued between the period from 1 January and 31 December 2012 cannot be relied upon after 1 January 2018.

Our Indirect tax team have significant experience dealing with submission letters to Revenue for businesses in various industries. If you require any assistance on this topic please contact Donal Kennedy or Richard McDaid.

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