Business Start Up Questions.

McP2011

Hi,

Have been searching around here but havent came up with the right answers and the revenue website is a complete mess to find a specific answer on.

If you were to start up a small business selling alloy wheels and were to import them from Belgium. Where do you stand with the vat etc, if you are not vat registered and the wholesalers country has a smaller vat rate than Ireland, do you just pay the vat at the belgium rate and thats it, nothing extra to pay?

Also is it worth it in terms of profit, say just for an example say you were selling sets at 300 with a profit of 40 euro, and you estimated to sell 2-4 sets per week ? Is there much tax to be payed etc?

Thanks.

Peterdalkey

If you buy in Belgium and you are not registered for VAT in Ireland you pay Belgian VAT and that is it. So if the wholesalers price to you is Euro 300 inc VAT then that is all you pay. If you intend to sell them for Euro 340 per set, you will make 40 Euro per set. If you have to pay delivery charges from Belgium and delivery charges to your customer and Paypal and/or eBay fees, you will probably make a loss on each set, so no tax payable.
If you do manage to sell 150 sets a year @ 40 Euro per set net proofit , the tax payable would be about the same as if your wages were increased by Euro 6000, and depending on your personal tax rates/circumstances, you would probably pay just over Euro 3000 in tax/levies.

DubTony

€40 markup on that product is too little. That's just 13%, returning a gross profit of less than 12%.
Consider your costs out of this. Storage, phones, wages, marketing, advertising etc. As well as what Peter outlined.

If you sell 4 sets a week you'll hit the VAT threshold anyway, so based on your estimation you'll have to register. In that case you'll pay no VAT to your Belgian supplier once you provide them with your VAT number.
This reduces your cost to €248 per set.
If you add €40 to that and then throw 23% VAT on top, you'll have a retail selling price of €355 approx.

The margins you're proposing might be ok if you're simply adding this range to an existing business (even then I think it's too small a margin). As a standalone operation, selling 4 sets a week will give you a gross profit of just over €8000.
At the margins you propose and to gross €50K, you'll need to sell 25 sets a week. To make it anywhere near viable at that margin, you'll need to sell at least double that amount.

McP2011

Thanks for the info and help.
Is there a a set tax rate that will allow me to estimate the amount of tax payable?

Also what are the risks if I was to only do it a small bit and not pay tax, I presume you would be better of going about it the right way as payments would probably be done through PayPal.

Thanks.

DubTony

Vat is 23%.
Income tax depends on different personal factors. Basic rate is 20% but like everyone else, you'll have tax credits to deduct from tax payable. As a self employed person you'll be required to fill and send in a tax return every year.
Revenue.ie has all the info. I think, though, you might need some basic accounting advice.

McP2011

I think I need to go to an accountant.

There are 2 different vat limits one at 37k and another at 70k I think, which of those would I fall under, if I were only selling the wheels?

So for talking sake I'll base it at selling 3 sets per week @ 340, with a profit of 40 per set, do you think im mad for even thinking about doing it?

I was looking at revenue website and I see there's different corporation tax rates, trading income and non trading income, I cant find a definite answer to which I would be working on. Is corporation tax all I need to pay?

And also with the vat limit must you register if its crossed?

Thanks again for the help.

Peterdalkey

You are selling goods so it is the 75K VAT threshold that applies. Corporation tax is only paid by companies, not sole traders or partnerships, you would be liable to income tax on any earnings( clear profit) as a self employed person.

As pointed out earlier, the margin you are looking at making per set is so small as to make the project unviable. IMO it might start to make sense at 100 margin per set.

DubTony

McP2011 wrote: »

So for talking sake I'll base it at selling 3 sets per week @ 340, with a profit of 40 per set, do you think im mad for even thinking about doing it?

In a word, Yes.

Peter and I have both said it. Your proposed margin is too small.

If you're only selling 3 a week you'll pay a fortune in shipping charges. For example, the last large item I bought from Holland came in a box about the size of two pillows. It was quite heavy and UPS charged €37 just to get it here. So unless your supplier is paying for shipping, you're already on a loser.

To get the best deal you need to buy a large amount in order to benefit from better supplier terms and cheaper shipping (the more you buy at any one time, the lower your shipping charges per item will be), so you'll need a large upfront investment in stock simply to get that deal. Then if you do purchase large volume you'll have storage charges.

You're looking at this the wrong way. If you want to compete and sell cheap wheels, you need to find a supplier that will provide you with cheap wheels. Determine how much your storage costs will be, how much your time is worth, and the costs that will be associated with running the business. Then determine how many units you need to sell at a given price that will provide a decent margin. If that total volume of sales (and profit) covers all your costs you're good to go. If it doesn't you either need to increase sales at the same price or put the price up in order to get the profit you need to cover the costs. At the same time you need to keep an eye on your competitors to ensure that you remain competitive.

Welcome to the business world. It's a jungle. Make sure you're prepared before venturing out.

Arjuna4

As a manufacturer and running a own business this information is too good for me..


I am In India and also wants to do import/export out of country and for that how much vat i had to pay on the products?

I got the answer from this thread..

Thanks

dbran

Hi

Intra-Community acquisitions of goods for business purposes by a person in the State is a special registration threshold for VAT of €41000 (not €75000).

http://www.revenue.ie/en/tax/vat/registration/thresholds.html

International VAT can be tricky and you are best seeing an accountant about this.

Regards

dbran

ironclaw

So for talking sake I'll base it at selling 3 sets per week @ 340, with a profit of 40 per set, do you think im mad for even thinking about doing it?

To put this another way, you'd be make €120 per week. You'd be better off in a part time job at that margin. If its a sideline, its a nice income provided it doesn't start taking any more than an hour or two a week.

You also need to factor returns, what if an alloy is scratched or cracked? Most sellers will credit you the wheel and the return, but you'll have to pay that upfront. I'd easily say that would obliterate €100 by the time you pack and ship it back to Belgium.

Retail needs at least a 50% margin in my eyes.