New to VAT? Here’s our top 5 tips

Here’s our top 5 tips when you need to register for VAT for the first time. Not sure if you need to register? Check out this link of the various thresholds which might require you to register for VAT in Ireland.

VAT returns are usually due to be filed every two months, and they cover the previous 2 months of sales & purchases. For example, the VAT return covering your sales & purchases for the 1 January – 28 Feburary period will be due by 23 March (assuming you file & pay on ROS). This comes around pretty quickly once you register so make sure you know when your first one is due. As well as your regular VAT returns you’ll also need to file an annual VAT RTD return which declares the ex-VAT values of your sales and purchases, split between those for resale and not for resale. This falls due the month after your year-end. If you buy/sell internationally, you may also be required to file VIES, Intrastat and/or OSS returns. International VAT is definitely worth seeking expert help with.

There are a few different VAT rates (23%, 13.5%, 9%, 0%) which can apply depending on the type of products/services you sell and also to whom you sell them (e.g. if you sell to customers in foreign countries different VAT may apply than when you sell the same thing to someone in Ireland). To identify the relevant VAT rate which applies to your products/services there’s a handy search function on Revenue website which you can access here. If it’s not clear-cut which VAT rates apply to your offerings, it is worth getting advice from an accountant or tax adviser as mistakes can prove costly. If you sell internationally, we would also recommend getting expert advice as VAT can get tricky for cross-border transactions.

Once you’re VAT registered, you are obliged to issue invoices to your customers showing the price excluding VAT and the relevant VAT applied, among other things. In order for your customers to claim the VAT back (e.g. if they are a B2B customer), your invoice must be a “valid VAT invoice” by meeting certain criteria. You can check out the requirements for a valid VAT invoice here.

You’re not legally obliged to use accounting software to raise invoices and manage VAT, but it sure does make the process easier. I always recommend my clients start using Xero once they register for VAT, if not already doing so. There are of course other options on the market and definitely worth checking out which option suits you and your business. Not only will an accounting software make the process of raising and tracking invoices easier, it can also help you make sure you don’t miss claiming the VAT back on any expenses you’re entitled to, hence reducing your VAT bill which is always a good thing!

Now that you’re VAT registered, for every €123 that you collect from a customer – €23 of that income isn’t yours, it’s VAT that’s payable straight to the Revenue (if you fall under the 23% VAT rate). Does this mean you have to raise all your prices by 23%? Not necessarily. If you are required to apply VAT on your prices, it is likely you can also claim the VAT back on your costs (which you wouldn’t have been able to do beforehand). So you need to work out your new profit margin and how this impacts your pricing – are your current prices sustainable? And if they need tweaked, how does this impact your market positioning? If you sell B2B your customers may not care at all that you are adding 23% to your prices if they can claim all of this VAT back. However, if you sell to the general public, you’ll need to consider how to adjust your pricing. Ideally, startups consider this long before they need to register for VAT as a price change can be difficult to navigate post-launch.