Acting as an agent or intermediary
The VAT treatment of agents and intermediaries depends on the nature of the services they provide to their principals, and in many cases, also on the nature of the supplies made by those principals. The various situations in which agents and intermediaries become liable to VAT are set out below, including the relevant legislation and definitions used in interpreting this legislation. This is a highly technical area of VAT law, and if you are unsure about the treatment you should contact your local Revenue Office.
Legislation
The relevant legislation governing the VAT treatment of agents and intermediaries is:
- Sections 3(1)(aa), 3(4), 5(4); 5(6)(a), 5(6)(e), 5(6)(f)(iii), 5(6)(g)(i)(II), 5(6)(ii) and 5(6)(gg);
- Paragraphs (ix), (xi) and (xviiib) 1st Schedule;
- Paragraph (vi) 2nd Schedule;
- Paragraph (vii) 4th Schedule;
- Paragraph (xxvi) 6th Schedule
of the VAT Act 1972;
And Article 44 of the E.U. VAT Directive 2006/112/EC.
Definitions
An agent for the purposes of the VAT Act is an intermediary who acts in the name of and on behalf of another person in the arrangement of goods and services.
An intermediary is any person who operates to facilitate any transaction or interaction between two other parties. For the purposes of the VAT treatment of agency, references to an intermediary are references to such an intermediary acting in the name of and on behalf of one of the other parties.
A principal is the person in whose name and on whose behalf the agent or intermediary acts.
Commission is a payment made by the principal to the agent or intermediary in respect of services carried out in the name of and on behalf of the principal. However, the term can also be commonly used in respect any payment made to an intermediary for any service, and the payment of commission should not be taken as a definite indicator of an agency relationship.
Analysis
The VAT legislation has been written (as far as possible) in such a way that a principal is not put in a less advantageous position by operating through an agent. This includes taking account of the administrative burden of reclaiming VAT, especially for principals established outside the State. Therefore provisions have been put into the legislation allowing for supplies of many services by agents in Ireland to be zero-rated where they are supplied to foreign principals (see table below).
For VAT purposes, in order for an agency agreement to exist, there must be three parties – the principal, the agent or intermediary, and a third party. In addition the agent or intermediary must deal with the third party in the name and on behalf of the principal. Wherever the VAT Act deals with agents or intermediaries it is in respect of this sort of agency agreement.
It is important to note that the terms 'agent', 'principal' and 'commission' generally have a broad commercial application, and their use extends beyond the restrictions of VAT legislation. It is necessary in each case to examine the nature of the contractual arrangements and the actions of the intermediary/agent.
Where a person, who may be referred to as an agent or intermediary, provides services to a principal but does not, in the course of providing these services,
- Arrange for a supply of services or goods to take place between the third party and the principal; and/or
- Does not act in the name and on behalf of the principal in dealing with the third party in arranging the services or goods;
then the service is not dealt with under the special provisions in the VAT Act applying to agents or intermediaries. In this situation, the services are taxed according to the general rules applying to service providers (i.e. the place of supply where the supplier has established his/her business). Examples include where an agent in Ireland sources customers for, or provides marketing/promotional services to, a principal outside the State, but the agent does not engage with the customers, leaving all such commercial contact to the principal.
Similarly, where a person who may be referred to as an agent or intermediary supplies goods or services in his/her own name to a third party, although the supply is actually made on behalf of a principal, then the agent or intermediary him/herself is also treated as a principal for VAT purposes, and accounts for VAT on the supplies accordingly. An agent who operates in this manner is sometimes referred to as 'an undisclosed agent'.
Legal provisions
- Under Section 5(5) of the VAT Act 1972 (as amended), the place of supply of services is where the person supplying the services has established his business. This mirrors Article 43 of VAT Directive 2006/112/EC [replacing Article 9(1) of the E.U. Sixth VAT Directive].
- Section 5(6)(f)(iii) of the Act provides that where the services of an intermediary, acting in the name and on behalf of another person in the arrangement of services [1], are supplied to a VAT-registered person in another E.U. Member State, then the place of supply is that other Member State; i.e. the supply by the intermediary to the principal can be zero-rated. It also includes services of an intermediary who takes part in the intra-Community transport of goods or activities ancillary to such transport, which are excluded from Section 5(6)(gg) – see 4 below.
- Paragraph (vii) of the Fourth Schedule to the Act provides that where an intermediary acts in the name and for the account of a principal when procuring any service specified in the Fourth Schedule then the place of supply of the service is where it is received, in accordance with the usual Fourth Schedule rules; i.e. the supply by the intermediary to a VAT-registered principal in another E.U. Member State can be zero-rated.
- Section 5(6)(gg) of the Act provides that (subject to Section 5(6)(f)(iii)) where an intermediary acting in the name and on behalf of another person supplies services to a principal in the arrangement of the supply of goods [2], whether or not that principal is registered for VAT, then the supply is deemed to take place where the underlying transaction, in respect of which the intermediary supplied his/her services, takes place. Therefore, if the goods are supplied in Ireland, then the intermediary must charge Irish VAT.
- Section 5(6)(g)(i)(II) of the Act provides that where an intermediary acting in the name and on behalf of another person supplies services to a person not registered for VAT in the arrangement of intra-Community transport of goods then the place of supply is the place of departure of the goods.
- Section 5(6)(g)(ii) of the Act provides that where an intermediary acting in the name and on behalf of another person supplies services to a person not registered for VAT consisting of the arrangement of services [3] then the place of supply is where the services of the intermediary are physically performed.
- Sections 3(4) and 3(1)(aa) provide that the sale respectively to and by an auctioneer or agent in the sale of goods is a supply for VAT purposes, effectively making the auctioneer or agent a principal in the sale of the goods.
Place of supply and rate of VAT
The tables below provide details of the place of supply of services of an intermediary or agent, and the rate of VAT that applies to each of these services.
Table 1
Rates of VAT applied to services of agents or intermediaries acting in the name of and on behalf of principals:
| Nature of Service | Exempt | 4.8% | 0% | 13.5% | 21% |
|---|---|---|---|---|---|
| Estate agent [1] | X | ||||
| Travel agent | X | ||||
| Agent in regard to exempt financial services [2] | X | ||||
| Insurance agent | X | ||||
| Agent in regard to supply of investment gold [3] | X | ||||
| Agent in the sale of agricultural land | X | ||||
| Agent in the sale of livestock | X | ||||
| Agents in the sale of works of art | X | ||||
| Customs clearance agent in relation to import / export of goods | X | ||||
| Export agents | X | ||||
| Agent for agricultural produce [4] | X | X | X | X | X |
1Taxable where the property is located. No liability to Irish VAT if property outside the State.
2Excluding certain management and safekeeping services – see Par (ix) 1st Schedule.
3Agent may waive exemption, in which case standard rate applies.
4Deemed to buy and sell goods – rate of the goods also applies to the services of the selling agent.
Table 2
Place of supply of the services of an agent or intermediary acing in the name and on behalf of a principal.
| Services provided by Intermediary/Agent (Based in Ireland) | Irish Principal Registered for VAT | Irish Principal Not Registered for VAT | E.U. Principal Registered for VAT in Other Member State | E.U. Principal Not Registered for VAT | Non-E.U. Principal |
|---|---|---|---|---|---|
| The arrangement of services | Ireland | Ireland | The other Member State | Ireland | Ireland |
| The arrangement of the supply of goods in Ireland | Ireland | Ireland | Ireland * | Ireland * | Ireland * |
| The arrangement of (including taking part in) the intra-Community transport of goods and/or ancillary activities | Ireland | Place of departure of the goods | The other Member State | Place of departure of the goods | Place of departure of the goods |
| The arrangement of ancillary transport services in connection with intra-Community transport of goods | Ireland | Place where transport services are performed | The other Member State | Place where transport services are performed | Place where transport services are performed |
| The arrangement of the export of goods | Ireland, but zero rate applies | Ireland, but zero rate applies | Ireland, but zero rate applies | Ireland, but zero rate applies | Ireland, but zero rate applies |
| The procuring of Fourth Schedule Services | Ireland | Ireland | The other Member State (4th Schedule rules) | Place of residence if for business, otherwise Ireland (4th Schedule rules) | Place of establishment or residence if for business, otherwise Ireland (4th Schedule rules) |
| Services connected with immovable goods | Place where the property is located | Place where the property is located | Place where the property is located | Place where the property is located | Place where the property is located |
| Sale of goods by auctioneer/agent | Treated as principal. Usual supply of goods rules apply | Treated as principal. Usual supply of goods rules apply | Treated as principal. Usual supply of goods rules apply | Treated as principal. Usual supply of goods rules apply | Treated as principal. Usual supply of goods rules apply |
Principal may be required to register for VAT in Ireland if the goods are received by him/her for business purposes.
[1] Other than services of an intermediary in procuring any Fourth Schedule service (see 3 above)
[2] Other than where the intermediary takes part in the intra-Community transport of goods or in activities ancillary to such transport. Services of this nature to a principal registered for VAT revert to Section 5(6)(f)(iii) (see 2 above) and the place of supply is where the principal is registered. See 5 above for supplies of such services to a principal not registered for VAT).
[3] Other than services of an intermediary in the arrangement of intra-Community transport of goods (see 5 above); or in the procuring any Fourth Schedule service (see 3 above).