Paying VAT on digital services

theflipdave

Hi,

I'm just wondering if I was to outsource design services or if I was to buy a website template from a website, would I need to pay additional VAT. I may want to do some of these things in the future for my business while creating products for my customers.
I know if I was a shop and I bought physical goods from outside the country I would need to pay VAT, but what if I'm paying someone abroad to do some design work or if I buying plugins from a foreign website and using them in a site I'm creating for customer?

Peterdalkey

It depend on where you are buying from and whether you are VAT registered in Ireland. Nobody outside the EU will charge you VAT.
Only VAT registered suppliers within the EU will charge you VAT if you are not VAT registered in Ireland. If you are VAT registered they will not but will need your Irish VAT number.

dbran

Hi

If you are receiving services from either inside or outside the EU that are taxable in the place where the service is received ie website development costs etc then you are obliged to register for VAT and account for the VAT that would have been charged to you had the service been obtained in Ireland.

There is no threshold to this obligation to register.

If you are already VAT registered you would account for the VAT on the reverse charge basis.

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

dbran

theflipdave

Thanks for the answers, so if I'm to understand this correctly, if I'm any sort of business that say buys a website template for their business or hosting or gets some web design work done for their website by someone outside Ireland, then you have to register for VAT? Even if I'm some offline business, like a photographer and I buy a template from a foreign company or a logo, then I'll have to register for VAT, regardless of what I'm earning?

dbran

Yes. Just to allow you to pay the additional VAT that you would have paid if you were obtaining the same service from an Irish supplier and for no other reason. ie you would not be obliged to charge vat on your sales until you reached the relevant threshold.

Otherwise it would be unfair competition to Irish suppliers who must charge VAT at Irish rates for the equivalent service.

dbran

theflipdave

Thanks, but I thought once you registered for VAT you have to pay it, regardless if you reach a threshold or not. Many freelancers register for VAT and add it to the price of services even though they are below the threshold. They do this so they don't have to pay VAT on their costs.

dbran

Not necessarily. It depends on the reason for your registration for VAT. There is a specific box to tick on the TR1/TR2 in this particular situation.

theflipdave

Yeah, I think I need to talk to an accountant about this. Had a look at the TR1 form and I'm pretty confused by it.

Alan Shore

So services are subject to a zero threshold but goods to €41,000 is that still the case.

http://www.revenue.ie/en/tax/vat/guide/registration.html#section4

dbran

Yes. I believe so.

dbran