The world of business is truly done on a global scale. In the past only the biggest corporations could afford to invest in opportunities in foreign markets. But with the advancement in technology and the rise of e-commerce more and more businesses are trading abroad. That means there are more foreign based companies that are doing business in Ireland than ever before.
With that comes the question, for these business entities, making purchases within the Irish borders, what is the rules and regulations regarding VAT. Because the reality is VAT may still be paid on goods and services, even though the company that is making that purchase does not operate in Ireland.
If you are a foreign company that has made purchases in Ireland and has paid VAT on those purchases, how do you now reclaim that VAT that was paid in Ireland.
There is a process that allows companies to make reclaim these VAT payments as long as they fall into line with certain conditions. Also there is variations in the conditions and process depending on weather the company making the purchase is within the EU or that company is operating outside of the EU. Below you will find the two different pathways as defined by current legislation at the time of writing.
Purchases made in Ireland by a foreign company operating in the EU:
- Firstly as and from the 1st of January 2010 all reclaims of VAT under the EU directive are required to be made through an Electronic VAT Refund (EVR).
- The goods and services purchased in Ireland, on which the reclaim is made, must be goods and services that would have had tax applied if the business was conducted in Ireland.
- The goods purchased must not be for use within Ireland or be motor vehicles hired for use within Ireland.
- The trade carried on in the EU must be a trade that would be VAT-liable if it were to be carried on in Ireland.
- The EU company will be required to be registered for VAT for the full refund period being claimed. (i.e. if the EU company are submitting a reclaim for January to December 2015 they would be required to be registered for VAT for that full period).
- Applications must be made by 30th September of the calendar year directly following the year for which the claim is being made. For example, a claim for the year ended 31st December 2015 will be required to be submitted on or before 30th September 2016.
- Applications for a reclaim of VAT would be submitted by the French company to the French authorities, who would forward the reclaim, electronically, to the Irish Revenue Commissioners.
Purchases made in Ireland by a foreign company operating outside of the EU:
- -Written proof of economic activity issued by the competent authority of that state must be provided.
- Applications for repayment are made through a paper Form VAT 60OEC – Application for Refund of Value Added Tax (VAT) by a taxable person not established in Ireland, as the EVR is not available to businesses outside of the EU.
- Applications for repayment must be made by the 30th of June of the calendar year directly following the year for which the claim is being made. For example, a claim for the year ended 31st of December 2015 is required to be submitted on or before 30th of June 2016.
It must be noted that while a refund is based on a calendar year, refunds can be claimed throughout the year, with a maximum of 5 claims allowable within a calendar year. If you are making a claim for a period of between 3 months and 1 calendar year the total amount of VAT claimed must not be less than €400, with a minimum VAT reclaim of €50 allowable for a period of a calendar year (12 months).
Growing Global Markets
As mentioned at the outset the global market is expanding at a significant rate. As Europe is the largest economy in the world it is an important economic and political player. EU Directives such as the one outlined above are developed to assist with the free trade between countries, however the application process will have a number of conditions and restrictions so it is advisable to seek assistance if making such a claim.
If you trade with other countries within the EU and would like assistance in completing a EVR or a Form VAT 60OEC please do not hesitate to contact us as we have extensive experience handling these matters.
If you need a Dublin based accountant to look after your accounting, bookkeeping, management accounts or other financial related business needs. Then click here now to call us here at Kilcoyne Accountants for a discussion regarding your requirements.