VAT on Exports

seamuskn

Hi
I buy goods from suppliers in the EU (Netherlands, France and UK) and sell them to customers in the US and EU.

80% of my sales are to the US and 20% are to the EU (France, UK, Italy mainly).

My EU suppliers charge me VAT and I also incur VAT on shipping and postage costs.

I ship directly from my suppliers to my customers.

My turnover is approximately €40k p.a. I expect this to grow rapidly.

My suppliers inform me that if I provide them with an Irish VAT number, they will not charge me VAT.

My question is, do I register for VAT in Ireland and if so what are the implications for me.

Can I reclaim VAT on the purchase cost of these goods and other costs incurred to get them to the customer?

Do I have to charge VAT on to my customers (who are individuals, not tax registered businesses)?

If I charge VAT to my customers what rate to I charge at?

Are there any tax implications for me in the US or EU?

I also have a small business in Ireland consisting of ‘massage, yoga and meditation’ services. Turnover from this is approx €10k p.a.

I am currently registered in Ireland as a sole trader for income tax purposes.

Your advice on this is kindly appreciated.
Many thanks

tanit

The main issue for Vat registration in your case is the threshold. if you are mostly doing business outside ireland but with EU and USA I pretty sure you're under the 41,000 threshold and considering that you are very close right now to it and expect to be over it I'd say you should register. Once you are registered you can avail of the no vat on your purchases but you will have to self account for in on your Vat return.

As far as I know anything you export shouldn't have any Vat on it as the goods exported to USA will have to be taxed at point of entry with whichever taxes they apply in the USA. The goods you export to the EU you need to remember to ask the client for their Vat number and then they will have no Vat on then. If you supply to private customers that's when it becomes complicated. Vat is applied where the customer lives and you are over the limits, you are under distance sales which means you will have to apply the vat rates of where the customer lives.

In my opinion you need an accountant with Vat experience on distance selling and it wouldn't hurt to call Revenue and get their help.

seamuskn

Thank you very much Tanit for this. Very informative.
I intend to get professional support, at the moment I'm trying to become aware of the implications before hand, and also finances precludes me just at the moment...

One more question on this

If I register for VAT with respect to my product sales, would this registration have any affect on my service business (Holistic - accupunture etc)?
If so is there a way around this?

Thanking you and kind regards

nompere

As a general rule, Revenue will compulsorily group register all businesses operated by an individual where the combined turnover exceeds the threshold. They are very much alive to the potential for tax avoidance this way. They will even group companies and sole trades where there is common ownership.

You'll find Revenue's views on page 31 of this document:

http://www.revenue.ie/en/practitioner/law/notes-for-guidance/vat/vat-consolidation-act2010.pdf

It's important to be aware that tax-based penalties for non-compliance can be minimal in the case of income tax and corporation tax, where the tax liability is linked to profits, but disproportionately high in respect of VAT which is turnover based, and takes no account of profits - if any.

In the early days of a business it's often more important to get your VAT right than anything else. Revenue tend to be unforgiving in the case of fiduciary taxes where the taxpayer is collecting the tax from someone else.

tanit

seamuskn wrote: »

Thank you very much Tanit for this. Very informative.
I intend to get professional support, at the moment I'm trying to become aware of the implications before hand, and also finances precludes me just at the moment...

One more question on this

If I register for VAT with respect to my product sales, would this registration have any affect on my service business (Holistic - accupunture etc)?
If so is there a way around this?

Thanking you and kind regards

If you are a sole trader all your turnover works towards the turnover figure as far as I know. That said in your case it becomes complicated as you have service sales and product sales. If you haven't started to trade and your turnover as a sole trader for services doesn't' force you to register for Vat (for services in Ireland the turnover threshold is 37,500 on a continuous 12 month period) you might better create a company to deal with the import/export thing. That said it's going to be more expensive from the accounting point of view than any accounts as a sole trader. But that's only my opinion and an accountant might tell you different (I'm only a student)

From the import/export thing you also need to consider that the threshold for imports only is 41,000 euros but for distance sales the thresholds are either 35,000 or 100,000 depending on the countries in EU you are selling. All this Vat thresholds have absolutely nothing to do with your exports to the USA (VAT free but affected by the 41,000 import one from intra-EU imports)

In short if you are expecting business to be in the 40,000 range from products only definitely register if you are not yet, as a sole trader everything counts towards your turnover regardless of trade. And get a specialist in import/export accountant because it is going to complicated or put the relevant Revenue section on speed dial. As far as I know the ones in those sections seem to be very pleasant and helpful people and they are very happy to help. You can also contact the people of Enterprise Ireland they might provide you advice and other supports either free or for a little charge

IHTH

exaisle

seamuskn wrote: »

Thank you very much Tanit for this. Very informative.
I intend to get professional support, at the moment I'm trying to become aware of the implications before hand, and also finances precludes me just at the moment...

One more question on this

If I register for VAT with respect to my product sales, would this registration have any affect on my service business (Holistic - accupunture etc)?
If so is there a way around this?

Thanking you and kind regards

I don't want to put you off your lunch but if you're over the threshold for registration, you may be obliged to register in respect of your accupuncture services....
Accupuncture is vatable at the reduced rate.
http://www.revenue.ie/en/tax/vat/leaflets/medical-services.html.