Posted by If you buy goods from other EU countries, you must setup VAT codes specifically for EU purchases in your accounts system/bookkeeping software, separate from domestic, and non-EU purchases vat codes
The main reason for these VAT codes is to allow you to be able to enter all the related transaction values on your VAT3 and VAT RTD forms for the Revenue Commissioners.
Under Irish VAT law you are required that purchase invoices be analysed as resale or non-resale transactions. Therefore, you need at least 6 VAT codes. (see note 1 below)
| Postponed Accounting for VAT | |
| Resale VAT codes | Non-Resale VAT codes |
| EUP01R @ 0% EUP02R @ 13.5% EUP03R @ 23% | EUP01N @ 0% EUP02N @ 13.5% EUP03N @ 23% |
The VAT can be calculated, but the value is not posted as a value to any General Ledger account.
You must use the VAT code rate applicable had the goods been bought in Ireland.
You need to be registered for VAT.
Many people misunderstand how VAT on Intra-EU purchases works. Here is how the Revenue Commissioners explain it on their website
Self-accounting for VAT
Under intra-Community acquisition (ICA) rules the purchaser is required to self-account on a reverse charge basis. This means that the business customer must account for Value-Added Tax (VAT) on the purchase of goods from other Member States.
The supplier in the other Member State is considered to have made an intra-Community supply (ICS).
Under this system:
- the supply is zero-rated in the Member State of dispatch as an ICS.
- the purchaser is liable for VAT on the acquisition of the goods.
- the purchaser must account for the VAT in their VAT return. The rate applicable is the rate of VAT which applies in their own Member State.
- if they are entitled to an input credit for the VAT payable on the ICA, this is reclaimed in the same VAT return,
and - the purchaser must account for VAT on any subsequent supply of the goods.
The important thing too understand is that you the purchaser are liable to pay the VAT on these purchases. It is like postponed VAT at point of entry, except there is no customs paperwork and no duty costs.
Effectively the cost to your business is zero. You owe the VAT on the Intra-EU purchase, but that VAT can also be claimed back just like any purchase invoice where you were charged VAT on by an Irish supplier.
Example:
Supplier Invoice
Date: 5th February 2021
Supplier A/c Code: BEB01
Supplier Name: Belgium Blocks
Goods Description: Blocks (HS Code 1234567890)
Net Amount EUR €1,100
VAT Amount EUR €0 (charged by supplier)
Gross Amount EUR €1,000
Self-accounting for VAT Calculation in Euro
Net Invoice amount €1100
Value for VAT Calculation (EURO)
Invoice Net €1100
VAT at 23% €253 (Self accounting for VAT calculation)
The VAT amount is the VAT rate that would be applied if the goods were bought in Ireland from an Irish Supplier
Information for VAT 3 Return and RTD
VAT 3 Return (extract)
BOX T1 – VAT on Sales
The self-accounting for VAT amount is added to the other values here (VAT on Sales, Postponed Accounting)
In this example €253 is our self-accounting for VAT amount
BOX T2 – VAT on Purchases
The self-accounting for VAT amount is added to the other values here (VAT on Domestic Purchases and Postponed Accounting)
In this example €253 is our self-accounting for VAT amount
Effect on your VAT liability
The overall net effect of the Intra-EU VAT charge is Zero, as the self-accounting for VAT value is entered in T1 box and then also allowed as a deduction in the T2 box
BOX E2 Total goods from other EU countries
In this example €1100 is the net amount
BOX E4 Total services from other EU countries
In this example no services were purchased, so the value is zero
VAT RTD (Return of Trading Details)
BOX P2 (Domestic purchases are NOT included in this value)
Value of Acquisitions from EU Countries Net of VAT, Postponed Accounting & VAT free imported parcels
Supplier Invoice BEB01 €1,100 (Goods)
BOX R1 (Domestic purchases are included in this value)
Value of Stock for Resale (purchases, Intra-EU acquisitions, Postponed Accounting & imports)
Supplier Invoice BEB01 €1,100 (Goods)
Summary of Boxes where information will be used on VAT3 and RTD
VAT 3 Boxes
| Self-accounting for VAT | €253.00 | T1, T2 |
| Supplier Invoice Net Value | €1100.00 | E2 |
RTD Boxes (All Net of VAT values and in Euro)
| Supplier Invoice Net Value | €1100.00 | P2, R1 |
Useful Links:
Acquisitions from other EU Member States
What is reverse charge (self-accounting)
NOTE 1.
Your software may have other features that allow you to analyse transactions as Resale and Non resale purchases or how to transact postponed accounting for VAT. We are going with the simplest method here.
If you don’t import goods at 0% or 13.5% then you may not need to setup those VAT rates. But it is good housekeeping to setup all possible VAT codes for consistency and accuracy.
IMPORTANT:
VIES and INTRASTAT are not dealt with here.
VIES comes into effect when you sell product and services to EU VAT registered businesses
INTRASTAT is based on the product statistic codes
What are VIES and Intrastat can be found here on the Revenue.ie website
Bookkeepers Ireland 