VAT registration and importing stock

MOH

Am I right in thinking that for a start-up importing most of their stock, it's not worth registering for VAT if the VAT rate in the country you're importing from is less than the Irish rate?

e.g. If you import from the UK, if you're registered, you have to charge your customers VAT at 21.5% but you're only currently paying 15% (or probably back to 17% from January) on your purchases so that's all you can claim back.

Whereas if you're not registered, you just pay your 15% extra to your supplier, and you either make a much better margin or you can cut your prices quite a bit.

(Obviously, this only applies if your foreign supplier doesn't pass the threshold where they have to register for VAT in Ireland)

Or do I have this completely wrong?

[edit]
Managed to find the remaining chapters of the VAT guide, which for some reason the revenue page on vat links to only chapter 1 of.
Looks like I do have it wrong - intra-EU community transfer are zero-rated, but then accounted for VAT in the destination country at the local rate. In fact, it now looks like you must register for VAT to account for these, even if you would ordinarily not have to due to not reaching the thereshold.
Do I have it right now, or am I making an even bigger mess of things?

kenbrady

MOH wrote: »

Am I right in thinking that for a start-up importing most of their stock, it's not worth registering for VAT if the VAT rate in the country you're importing from is less than the Irish rate?

e.g. If you import from the UK, if you're registered, you have to charge your customers VAT at 21.5% but you're only currently paying 15% (or probably back to 17% from January) on your purchases so that's all you can claim back.

Whereas if you're not registered, you just pay your 15% extra to your supplier, and you either make a much better margin or you can cut your prices quite a bit.

(Obviously, this only applies if your foreign supplier doesn't pass the threshold where they have to register for VAT in Ireland)

Or do I have this completely wrong?

If your customers are non vat registered, it is always best not to register for vat until you have to. As it will make your price cheaper.

MOH

kenbrady wrote: »

If your customers are non vat registered, it is always best not to register for vat until you have to. As it will make your price cheaper.

Depends how quickly the business takes off, if stock turnover rates are low initially and I can't reclaim the VAT on the stock and other start up expenses I'll be out of pocket for longer.

kenbrady

MOH wrote: »

[edit]
Managed to find the remaining chapters of the VAT guide, which for some reason the revenue page on vat links to only chapter 1 of.
Looks like I do have it wrong - intra-EU community transfer are zero-rated, but then accounted for VAT in the destination country at the local rate. In fact, it now looks like you must register for VAT to account for these, even if you would ordinarily not have to due to not reaching the thereshold.
Do I have it right now, or am I making an even bigger mess of things?

If you are VAT Registered and buying the goods from the UK, you don't have to pay the VAT, but you do have to account for it in your vat accounts, this will be both a credit and debt, with no actual money coming out of your account.

If you are not VAT Registered you just pay the price including VAT and do nothing else.

MOH wrote: »

Depends how quickly the business takes off, if stock turnover rates are low initially and I can't reclaim the VAT on the stock and other start up expenses I'll be out of pocket for longer.

These are basic fixed figures, so put them in a spreadsheet and work it out.

1) If you register for VAT cash flow will be better as you can reclaim the vat, but your sale price will be higher, so more difficult to sell

2) Don't register for vat, can't reclaim initial vat, but price lower so stock easier to shift.

Your arguement above is based on the business not being successful ie(stock purchases > sales)

Cgm

If you realisitically think you will reach threshold then charge VAT straight away as this will ease cashflow problems. Also are your close competitors charging VAT i.e if so you will not be a commercial disadvantage.

In relation to your VAT query, there is something in the legislation called "expression of Doubt", you can write a letter to Revenue asking for clarificaiton about a VAT issue and you will not be penalised for late payment etc if the query is genuine

Fyi, chapter 4 of the Revenue guide outlines VAT situation of services supplied from other EU countires and how they effect exemptions.

MOH

kenbrady wrote: »

These are basic fixed figures, so put them in a spreadsheet and work it out.

1) If you register for VAT cash flow will be better as you can reclaim the vat, but your sale price will be higher, so more difficult to sell

2) Don't register for vat, can't reclaim initial vat, but price lower so stock easier to shift.

Your arguement above is based on the business not being successful ie(stock purchases > sales)

Given the exchange rate and current VAT rates, wouldn't it be worth buying a quantity of stock now if VAT on purchases was being applied at 15%? Even if it wouldn't be sold for a while. So short term, purchases would exceed sales.

Cgm wrote: »

If you realisitically think you will reach threshold then charge VAT straight away as this will ease cashflow problems. Also are your close competitors charging VAT i.e if so you will not be a commercial disadvantage.

They are.

In relation to your VAT query, there is something in the legislation called "expression of Doubt", you can write a letter to Revenue asking for clarificaiton about a VAT issue and you will not be penalised for late payment etc if the query is genuine

Fyi, chapter 4 of the Revenue guide outlines VAT situation of services supplied from other EU countires and how they effect exemptions.

Had a look at ch. 5+6 of the 2008 VAT Guide, the bit that confused me was "all persons .... including exempt persons ... must register and account for VAT on intra-Community acquisitions, subject to the threshold."
Which I take to mean that if I would normally be exempt from VAT registration due to not reaching the 75k turnover threshold, I would still have to register for VAT on the imported goods, if I went over the 41k threshold for that.

Just looking at it again, foreign traders dealing with non-registered customers here are obliged to register for VAT here if they reach a 35k threshold. Which means unless I find a supplier already VAT-registered here, they're unlikely to deal with me unless I'm registered, as that could lead to them having to register here.

My brain is hurting a bit, I might just follow your suggestion and write to the revenue.

kenbrady

MOH wrote: »

Had a look at ch. 5+6 of the 2008 VAT Guide, the bit that confused me was "all persons .... including exempt persons ... must register and account for VAT on intra-Community acquisitions, subject to the threshold."
Which I take to mean that if I would normally be exempt from VAT registration due to not reaching the 75k turnover threshold, I would still have to register for VAT on the imported goods, if I went over the 41k threshold for that.

Just looking at it again, foreign traders dealing with non-registered customers here are obliged to register for VAT here if they reach a 35k threshold. Which means unless I find a supplier already VAT-registered here, they're unlikely to deal with me unless I'm registered, as that could lead to them having to register here.

My brain is hurting a bit, I might just follow your suggestion and write to the revenue.

VAT guides only apply to people who are registered for VAT, the 'exempt persons' refers to vat exempt entities not people who are not registered for vat.
If you decide not to register for vat, forget about it as it does not apply to you.

MOH

kenbrady wrote: »

VAT guides only apply to people who are registered for VAT, the 'exempt persons' refers to vat exempt entities not people who are not registered for vat.
If you decide not to register for vat, forget about it as it does not apply to you.

In that case, I'm needlessly confusing myself. Thanks