Have I got this right?

Truss

Have gotten advice not to register for VAT unless I would make a gross profit of over €75,000 on a startup business - but this also means that if I don't register for VAT I cannot claim back the VAT on say a computer I purchase for the business...is that correct?

Also, if I do not register for VAT that means that I do not have to charge VAT on the supply of goods I am selling? So -

- typically charging say €100 for product, not registering for VAT means I can keep the cost to the buyer at €100, however if I registered for VAT then I would have to charge €121? Is this a benefit created by the government to give startups a better chance at charging less money for products?

Legend100

that advice is incorrect. it is not the gross profit that determines vat registration, it is your turnover that will require you to register for vat or not.

Since you are supplying goods, the 75K threshold is the correct level of turnover required.

You will charge vat at 21.5% on all products sold (depends on what your product is but making the assumption it is 21.5% rated for simplicity)

You can then reclaim vat on purchases as an input credit on your purchases of materials/ fixed assets and certain expense items

Truss wrote: »

- typically charging say €100 for product, not registering for VAT means I can keep the cost to the buyer at €100, however if I registered for VAT then I would have to charge €121? Is this a benefit created by the government to give startups a better chance at charging less money for products?

There is no "real" benefit to the seller if they are vat registered. The extra cost to a non-vat registered customer is the final point of a vat transaction and is where the revenue finaly collect their vat. If you are not vat registered and you buy your materials for your product, your supplier will more than likely be charging you vat and since you cannot reclaim it, the supplier will be paying the vat to the revenue without a subsequent reclaim on your side. The vat transaction is complete

If you are vat registered, you reclaim the vat incurred and charge vat to your customers who may or may not be registered. The vat cycle is complete when the regular non-vat registered consumer cannot reclaim the vat.

Truss

So just to get a bit of clarity (I am reading the revenue guides but still like to get a straightforward answer) - it is not necessary for me to register for VAT unless turnover is over €75,000 - which it will not be and possibly never be, therefore if I do not register for VAT I do not have to add VAT onto the products I sell?

Legend100

yes this is correct as long as you are supplying goods and not a service. You will not be able to reclaim the vat on purchases you incur either.

if you intend to purchase alot of equipment, it may be worth your while registering to reclaim the vat element but you need to speak to an accountant to examine your cash management with regards to vat registration

cannns

Truss wrote: »

Have gotten advice not to register for VAT unless I would make a gross profit of over €75,000 on a startup business - but this also means that if I don't register for VAT I cannot claim back the VAT on say a computer I purchase for the business...is that correct?

Also, if I do not register for VAT that means that I do not have to charge VAT on the supply of goods I am selling? So -

- typically charging say €100 for product, not registering for VAT means I can keep the cost to the buyer at €100, however if I registered for VAT then I would have to charge €121? Is this a benefit created by the government to give startups a better chance at charging less money for products?

I don't think it is necessarily a benefit created to assist or help start-ups (although it definitely does). I think it is more to remove an administrative burden that would not recoup sufficient revenues for the state to justify the activity. For instance, if there was no exemption, a person who did a spot of window cleaning as a part time extra would be required to register for VAT, however, he or she might earn very little, therefore the VAT recouped would be insignificant to the state and possibly be less than the administrative cost incurred in the entire process. A lot of hassle for everyone involved that would bring in very little if any positive revenues to the state.

Truss

Great, thanks for the information.

An additional question related to the original is that if I do not register for VAT what do I do then if someone asks for an invoice? The products I will be selling are online and can be bought internationally, is it simply a case that I should state on invoices created online that no VAT has been added to the purchase - so no VAT added then there is no VAT for a company that may purchase my products to reclaim, therefore they would not care either way.

Considering some businesses may purchase my products should I then have some clear statement on the site where the products are purchased that no VAT has been added and that no VAT will be charged either?