VAT Treatment of International Purchase and Sale

patg

Hi - Am going round in circles trying to identify correct treatment for the following transactions:

1) Ireish resident company purchases clothing from EU (Italy) resident manufacturer.
2) Irish resident company resells same clothing to EU (Italy) customer.

On transaction 1, The maufacturer is saying they should apply Italian VAT, my initial reading is that this is incorrect, and that VAT should be accounted for only by the Irish company on the reverse charge basis - however further reading suggests this only applies when goods are transported to this State.

Transaction 2, Again, my initial thought is that this is exempt from Irish VAT and should be accounted for only by the purchaser (same principle as (1); however again is the fact that these goods do not cross a border relevant...

Would be grateful if anyone can add clarity.

Patrick

nompere

You need professional advice, but I reckon the Italian manufacturer is right in the 1st case.

It seems at least a possibility that you are doing business in Italy, and need to establish whether you should be registered for VAT there.

Shane732

patg wrote: »

Hi - Am going round in circles trying to identify correct treatment for the following transactions:

1) Ireish resident company purchases clothing from EU (Italy) resident manufacturer.
2) Irish resident company resells same clothing to EU (Italy) customer.

On transaction 1, The maufacturer is saying they should apply Italian VAT, my initial reading is that this is incorrect, and that VAT should be accounted for only by the Irish company on the reverse charge basis - however further reading suggests this only applies when goods are transported to this State.

Transaction 2, Again, my initial thought is that this is exempt from Irish VAT and should be accounted for only by the purchaser (same principle as (1); however again is the fact that these goods do not cross a border relevant...

Would be grateful if anyone can add clarity.

Patrick

Where are the goods located? Where does the transportation end in each transaction?

Assuming the goods never leave Italy then both I would imagine both transactions are within the scope of Italian VAT. Be careful to note that the Irish supplier in transaction 2 may well have an exposure to account for Italian VAT on the sale.

patg

Thanks to both responders. I will take up elsewhere.
You seem to have similar hunches on how this will pan out - not as easilt as I would have hoped but so be it.
Thanks for taking the time.

Mr. Incognito

As you will be supplying goods in Italy you may oblidged to register for Italian VAT purposes.

As such the purchases have a nil VAT effect as you can claim them back in your Italian VAT return

Make sure and register BEFORE you start purchasing as you cannot backdate the VAT claim before the VAT period in which you register.

Here is an overview

Goods- Distance Selling

An Irish supplier who makes distance sales to customers in other Member States who are not registered for VAT, is liable to Irish VAT on such sales until the value of the sales reaches the threshold applying in that other Member State. Once the value of the supplier’s sales exceeds the threshold in the other Member State, the supplier is obliged to register in that Member State and account for VAT at the rates applicable there. If the appropriate threshold is not exceeded, the supplier may, nevertheless, opt to account for VAT in the Member State to which the distance sales are made.

It should be noted that a supplier who is engaged in distance sales to several Member States is required to register in each Member State in which the value of the distance sales exceeds the appropriate threshold.

Under the EU VAT arrangements, Member States were required to adopt a distance sales threshold of either €35,000 or €100,000. Ireland has opted for €35,000.

patg

Mr Incognito - thanks there are points in your information which are really of interest to me.

Practically speaking - how would someone Ireland based go about registering for VAT in other EU countries?
I am thinking that means getting involved witha big 4 accountancy firm who would have a presence in each jurisdiction or relying on recommendations from supplier/customers/contacts in those jurisdictions (possible conflict of interest... confidence issues)

Also if you are registered for VAT in that country - does it then follow that you would need to complete a company return showing activity there& Corporation Tax return... Note all activity is undertaken as distance sales and there is no office or place of business in any country other than Ireland.

RUDOLF289

Hi Patg,

Have a look at this company ; http://tmfvat.com

They would be able to help you with any VAT issues (almost) worldwide but certainly within the EU.

I believe you only have to register for VAT and make sure your returns are filed on time. No need to register a company and file company returns in each jurisdiction.

At the risk of disagreeing with Mr. Incognito's excellent advice, you are able to back date your VAT registration. I believe, certainly in Ireland, you can apply for a registration today, but back date it for a number of months. Again, TMF would probably be able to assist you in that respect.

Hope this helps

Cheers,
Rudolf289

patg

Thank you Rudolph.
Much obliged for your time and advice.