When should your e-commerce business register for Ireland VAT?

The Irish government is well known for having a favourable Corporation Tax rate, but the Republic of Ireland VAT rate is fairly standard. If you are wondering if your e-commerce business should register for VAT in Ireland, here’s what you need to know.

Wherever your business is registered will be where it will hold domestic status, but as an e-commerce entrepreneur, your business will inevitably expand beyond the UK, and maybe beyond Europe. With each country you enter, there will be a set of VAT thresholds and rules that you must abide by.

When you will need to register for Ireland VAT

As we have previously covered, each country sets their own VAT threshold for domestic and foreign businesses, although this will change in 2021, as you will see below. For example, the UK rate is currently £85,000 for resident businesses and £0 for foreign businesses.

As a UK registered business, you will need to register for VAT in the Republic of Ireland once you hit their foreign business VAT threshold, which currently stands at zero (Tax year 2019/20). This means that if your business intends to trade any goods or services to residents in Ireland, you must register immediately before trading commences.

Look before you leap

If you begin trading in Ireland before you have registered for VAT, you will receive penalties of up to €4,000 for not registering, and €4,000 for failing to charge VAT. To avoid being penalised, we always suggest that you discuss your intent to sell in a new country with both your accountant and an accountant who is registered in the country in question. This will allow registration and paperwork to be finalised before a sale is made, avoiding costly mistakes and headaches down the line.

Current Ireland VAT rates

As of January 2020, Ireland’s standard VAT rate is 23%. It also offers a reduced rate of 13.5% and a second reduced rate of 9%. E-commerce businesses predominantly fall under the standard VAT rate if they sell physical goods, and the second reduced rate if they sell digital goods such as eBooks.

Changes in 2021

The One-Stop-Shop Portal (OSS) will be launching for all EU Member State countries from 1st January 2021 and will simplify VAT returns for international e-commerce businesses. Under the new legislation, e-commerce business owners should see their VAT costs fall, allowing them to compete with similar businesses that are not registered.

Should I register now?

With a VAT threshold of zero, you may feel it is prudent to register your e-commerce business now, even if you have no intent to trade in the country in the near future, but this is incorrect. Once you have registered, you will be legally obligated to complete VAT returns on a quarterly basis, with failure to do so risking another penalty of €4,000.

If you are not actively looking at trading within Ireland, you are better holding fire until it is on your radar. Otherwise, with no trade interaction in the country, you will merely be adding an easily forgotten task to your to-do list and creating ample opportunity for fines.

 Next steps

Juggling VAT across multiple countries can be complicated with plenty of room for error and it’s easy to get caught out. If you are looking at registering for VAT in Ireland, or any other country, we highly recommend you get in touch with our team who can ensure you’re complying with all current legislation.

The best time to act is now.