Revenue Information Note

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Intra-Community Acquisitions

1. Introduction

This document sets out the VAT treatment of EU intra-Community acquisitions of goods by taxable persons, and it outlines the postponed accounting system for such acquisitions.

The terms ‘intra-Community supply’ and ‘intra-Community acquisition’ relate to goods supplied by a business in one EU Member State to a business in another which have been dispatched or transported from the territory of one Member State to another as a result of such supply. (The terms also apply to new means of transport supplied by a person in one Member State to a person, including a private individual, in another Member State and transferred to that Member State. This is dealt with in paragraph 10).

2. Acquisitions from other Member States

2.1: The VAT treatment of EU intra-Community acquisitions is as follows:

  1. The supply will be zero-rated in the Member State of dispatch as an EU intra-Community supply.
  2. The accountable customer becomes liable for VAT on the acquisition of goods at the appropriate rate in his/her own Member State.
  3. The accountable customer declares a liability for VAT in the VAT return.
  4. Where an accountable person is entitled to full deductibility (input credit), the VAT payable on the intra-Community acquisition is deducted in the same VAT period, thus effectively cancelling out the VAT liability.
  5. The accountable customer accounts for VAT on any subsequent supply of the goods in the appropriate VAT return.

2.2: The mechanism by which an accountable person in the State accounts for the VAT charge arising in respect of goods acquired from another Member State is termed ‘Postponed Accounting’.

2.3: The VAT 3 return requires an accountable person to declare summary VAT details. It includes two statistical boxes in respect of intra-Community transactions that must be completed (E1 and E2). The annual return of trading details is a more comprehensive document which requires a breakdown of the annual trading figures according to VAT rate.

3. Postponed Accounting with full deductibility

3.1: A person registered for VAT in the State can buy goods in another Member State at the zero rate provided the goods are dispatched or transferred to this State. The accountable person is required to account for VAT on any intra-Community acquisition of the goods on arrival in the State, at the appropriate Irish VAT rate, in Box T1 of the VAT3 return for the period in which the goods are acquired. Where an accountable person is entitled to full deductibility, a simultaneous input credit may be taken in Box T2 of the same VAT3 return, thus cancelling the liability (see appendix - example 1). The treatment of accountable persons who are not entitled to full deductibility is dealt with in paragraphs 4 to 5 below.

If the goods acquired are subsequently supplied, liability on that supply will arise in the normal way in the period in which the supply is made (see appendix - example 1).

4. Partially exempt persons

4.1: As outlined above, accountable persons with full deductibility can take a simultaneous credit for any VAT liability on intra-Community acquisitions. However, a number of accountable persons registered for VAT may not have full input tax deductibility e.g. a bank which is primarily involved in exempt activities but also carries on a taxable activity such as leasing of movable goods. Where such persons acquire goods in another Member State, they are liable to VAT on the acquisition of these goods but they are only entitled to a deduction in accordance with the accountable person’s existing apportionment arrangements (determined by the exempt/taxable status). The making of intra-Community acquisitions does not affect the person’s existing input tax deductibility entitlements. The accountable person is required to account for VAT on any intra-Community acquisition, at the appropriate Irish VAT rate, in Box T1 of the VAT3 return, for the period in which the goods were acquired. However the extent to which this VAT may be simultaneously deducted (Box T2 on the VAT3 return) varies.

4.2: A full deduction of the VAT on the intra-Community acquisition arises if the goods are wholly attributable to a person’s taxable activities. No deduction of the VAT is allowable if the intra-Community acquisition relates to a person’s exempt activities. If the intra-Community acquisition is used for both types of activity i.e. dual use inputs, the tax should be deducted in accordance with The accountable person’s existing apportionment arrangements (see appendix - example 2).

5. Persons required to register solely because of intra-Community acquisitions

Wholly exempt bodies (e.g. insurance companies and building societies) and (b) other non-taxable entities (e.g. public authorities and universities) are required to register for VAT if their intra-Community acquisitions exceed or are likely to exceed €41,000 in any continuous period of 12 months and they must account for VAT on their intra-Community acquisitions, through their VAT return, (Box T1), at the rate applicable to the supply of such goods within the State. They are not entitled to any deduction in relation to the intra-Community acquisitions or indeed any other VAT that they have borne on purchases or imports (see appendix - example 3).

Persons who become registered for VAT for their intra-Community acquisitions and who supply taxable goods or services within the State are required to account for VAT on their supplies.

6. EU intra-Community acquisitions by farmers

Farmers are also obliged to register for VAT where their intra-Community acquisitions exceed or are likely to exceed €41,000 in any continuous period of twelve months. However, farmers registered in respect of their acquisitions may opt to retain their flat-rate status for the purpose of obtaining the 5.2 per cent flat-rate addition on their agricultural supplies to registered persons.

7. Racehorse trainers

Similarly, a flat-rate farmer who is registered for VAT in respect of racehorse training, who is obliged to account for VAT on intra-Community acquisitions may retain flat-rate farmer status for all agricultural purposes, other than racehorse training.

8. Retail Schemes

Traders who calculate their VAT liability by reference to a retail scheme should specifically ensure that goods for resale acquired in another Member State are always accounted for at the correct rate and that they include the intra- Community acquisition at the correct VAT rate in the scheme as purchases for resale. The VAT rate applicable to an intra-Community acquisition is always that which applies to the supply of the same goods here.

9. How to calculate the VAT due on intra-Community acquisitions

VAT becomes due on the fifteenth of the month following the acquisition or if the supplier in the other Member State issues an invoice before that date, the date when the invoice is issued. The rate of VAT applicable is the rate that applies to the supply of the same goods in the State. The VAT is assessed on the price charged for the goods. If the supplier’s invoice is in foreign currency, the rate of exchange applicable when the tax becomes due should be used. Tax is payable by the 19th day of the month following the period during which the tax became due. The following example serves to illustrate the arrangements:

A local authority acquires a computer from a German company. The supply in Germany is zero-rated because the local authority has provided its VAT registration number to the German company and the goods have been dispatched or transported to Ireland.

  • Computer delivered 29/1/09
  • Invoice issued 12/3/09
  • Invoiced amount €200,000
  • VAT on acquisition at 21% €42,000
  • No input credit allowed.
  • VAT (€42,000) payable to Collector-General with VAT returns for the period.

10. Intra-Community acquisitions of new means of transport

10.1: The purchase of new means of transport in other Member States by private individuals and accountable persons is subject to VAT in the country of destination.

10.2: In the case of private individuals and accountable persons who are not entitled to a VAT deduction, VAT on the acquisition of a new means of transport is normally payable with the Vehicle Registration Tax (VRT) or, if no VRT is payable, at the time of registration of the vehicle. In the case of new vessels and aircraft, VAT becomes payable not later than three days after the date of arrival in the State.

10.3: Accountable persons who are entitled to a VAT deduction on the acquisition of a new means of transport must account for the VAT through their VAT return.

11. Intra-Community Transport of Goods

The special arrangements relating to the intra-Community Transport of Goods are dealt with in a separate VAT Information Leaflet.

12. INTRASTAT returns

Traders acquiring more than €191,000 worth of goods per annum from other Member States or supplying goods in excess of €635, 000 per annum to other Member States are also obliged to submit a periodic INTRASTAT return.

13. Branch to branch transfers

For VAT purposes, branch to branch (with some exceptions) and similar transfers of goods between business persons in different EU Member States are also treated as being intra-Community supplies and acquisitions.

14. Certain transfers not supplies

14.1: For VAT purposes, certain transfers to other Member states are not treated as intra-Community supplies/acquisitions.

14.2: These include goods for installation or assembly by the supplier (in this case the supplier is obliged to register and account for VAT in the State), transfers for the purposes of having contract work carried out on them and transfers with a view to their temporary use in another Member State.

Appendix

Example 1

A company with full deductibility acquires a computer in the UK. for €80,000. Supply is zero-rated in the UK. The company sells the computer in the State during the same taxable period for €100,000 plus VAT. These are the only transactions in the period.

Acquisition of computer €80,000 @ 21% €16,800 include in Box T1 of VAT 3

Simultaneous input credit €80,000 @ 21% €16,800 include in Box T2 of VAT3

Subsequent supply of computer in the State €100,000 @ 21% €21,000 include in Box T1 of VAT3.

Net VAT payable €21,000 include in Box T3 on VAT3.

Example 2

An Irish bank (60% taxable/40% exempt activities) acquires a computer in the UK which is a dual use input to be used for both its taxable and exempt activities in this State for €80,000. Supply is zero-rated in the UK.

Acquisition of computer €80,000 @ 21% €16,800 include in Box T1 of VAT 3.

Simultaneous input credit on 60% of €80,000 @ 21% € 10,080 include in Box T2 of VAT 3.

Net VAT payable €6,720 include in Box T3 of VAT 3.

Example 3

An insurance company or university acquires a computer in the U.K. for €80,000. Supply is zero-rated in the UK.

Acquisition of computer €80,000 @ 21% €16,800 include in Box T1 of VAT 3

No input credit

Net VAT payable €16,800 include in Box T3 of VAT 3.

Further information

Enquiries regarding any issue contained in this document should be addressed to the Revenue District responsible for the taxpayer’s affairs. (Contact details for all Revenue Districts.)

This leaflet is issued by

VAT Interpretation Branch,
Indirect Taxes Division,
Dublin Castle.

January 2010