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Invoicing VAT Exempt customer

  • 24-11-2015 11:30am
    #1
    S. Goodspeed
    Registered Users, Registered Users 2 Posts: 418 ✭✭


    Hi guys,

    Hopefully this is a quick one. I've recently started an ecommerce site and charge commission on the sale of third party products. We're selling products for a number of different third parties, some VAT registered, some not VAT registered (under the threshold) and some VAT exempt. My company is currently not VAT registered but we have applied for it. Importantly we do not take possession or ownership of the goods, so any transaction is technically between the third party seller and the end customer.

    In general the products on our site will be sold inclusive of VAT if the seller is VAT registered only. Also we deduct the VAT if shipping destination is outside of the EU. Once VAT registered we will charge VAT on the commission we charge to everyone (VAT registered and VAT unregistered).

    I'm just unclear how to treat VAT exempt sellers. We don't include VAT on their products but when it comes to charging commission should we include VAT as normal?


Comments

  • #2
    dbran
    Registered Users, Registered Users 2 Posts: 2,094 ✭✭✭dbran


    You charge VAT at the standard rate on your commission irrespective of whether the underlying goods or services are exempt from VAT.

    dbran


  • #3
    S. Goodspeed
    Registered Users, Registered Users 2 Posts: 418 ✭✭S. Goodspeed


    Thanks for confirming Dbran.

    Out of interest, what is the benefit of being "Vat exempt"? I know your retail price is lower but is it only really beneficial if you don't have a lot of inputs that you need to pay VAT on yourself?


  • #4
    Mr. Incognito
    Registered Users, Registered Users 2 Posts: 9,798 ✭✭✭Mr. Incognito


    You are confusing the status of the recipient which is irrelevant for VAT purposes with the status of the person selling the good which is.

    If you are not VAT Regsitered you cannot charge VAT.

    When you are VAT registered you charge VAT and supply a VAT invoice. What they do with it is none of your business after that


  • #5
    DmanDmythDledge
    Registered Users, Registered Users 2 Posts: 890 ✭✭✭DmanDmythDledge


    One possible difference to the previous responses is if the recipient of the products as a Section 56A exemption. They would have to provide this certificate to you in order to receive goods/services without paying VAT. One obvious benefit of this would be from a cashflow point of view.

    It is always very important to distinguish between 0% VAT, VAT exempt business (being the classification of the actual trade) and businesses who have obtained a VAT exemption. There can be significant differences in the implications of all even though there is no VAT in any of them.


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