VAT in Ireland: 5 Common Questions Answered

VAT or Value Added Tax is a complex tax and is based on consumer spending. As a significant source of revenue for the government, VAT accounted for €12.4million, around 25% of the total tax intake in 2016. As such, government take VAT very seriously as do most business owners.
We are often asked about VAT from both start up businesses and those trading for a few years. Here are the most common questions we get regularly asked.

Do you need to register for VAT?

As a general rule, you have to register for VAT if you expect your turnover to be:
€37,500 a year or more for a service based business
€75,000 a year or more if you’re a product based business
Some businesses are a combination of both product and service supply. If that is the case, then it’s advised to be cautious and use the €37,500 number rather than the €75,000 number.

Can you voluntarily register for VAT?

Yes. Even if you do not make the expected turnover, you can still register for VAT. I would suggest that you look at your client profile while making the decision.
If your clients are private individuals rather than business entities, then delaying registering for VAT might be a good idea. There are pros and cons like everything. You can keep your prices down as you aren’t charging for VAT unlike some of your competitors. However, when you do start to add on VAT, existing customers may get annoyed as your price has increased.
If your business is aimed at other businesses, then you would be wise to register for VAT even if you’re below the turnover threshold. You get to offset VAT paid with VAT collected. There may be extra paperwork with registering for VAT but using a cloud based system like Clarity will make it easier. Also your accountant can help with doing it for you or perhaps supplying you with a spreadsheet to record your details.

What is the VAT rate?

The standard rate of VAT is 23%. There are other rates of VAT such as reduced VAT rate, second reduced VAT rate, zero rate of VAT and livestock VAT rate. has a great search facility, VAT Rates Database on their website so you select the correct VAT Rate for your product or service.

How can you account for VAT?

There are two ways to calculate your VAT – on an invoice based basis or a cash based basis.

Invoice based

This is where you are accountable for VAT on every invoice you issue. This means you pay the VAT regardless of when you get paid. Within the taxable period, VAT on invoices is calculated and you pay that amount.


This is where you are accountable for VAT on monies received. So when you get paid, you pay the VAT, regardless of taxable period.
You can use this basis if your expected annual turnover will be less than E2 million a year. You can also use this method if at least 90% of your products or services are bought by customers who are not registered for VAT.
It’s entirely up to you which method you use but the latter option certainly helps with cashflow.

How long do I have to keep my VAT invoices for?

It’s important that you retain them for at least 6 years. The Revenue take VAT very seriously so they can request your tax invoices for up to at least 6 years.
VAT registration or computation need not be as complicated as it sounds. Talk to your accountant about how to maximise your efficiencies of recording and paying it. Use an online accounting system like our service Clarity to help with calculating it. Filing late creates fines and penalties and also increases the risk of a Revenue audit which you want to avoid.
If you’d like to talk to us about anything in this article, please feel free to contact us. We can help keep your business in shape this coming year.