Useful Terms & Definitions
Accountable persons
An accountable person is a taxable person who is required to register for VAT in respect of the supply of taxable goods or services within the State. In addition, the following persons are accountable: those who supply immovable goods (in certain circumstances); those who are required to register in respect of intra-Community acquisitions; those who are in receipt of Fourth Schedule services; those who are in receipt of cultural, artistic, entertainment or similar services from non-established performers; and those who are treated as a group for VAT purposes.
The following persons, if they are not established in the State, are not regarded as accountable: those who only supply goods for installation or assembly in the State; those who only supply gas through the natural gas distribution system; those who only supply electricity; sub-contractors only supplying construction services to a principal contractor; and those only supplying cultural, artistic, entertainment or similar services.
The persons who receive these services are regarded as the accountable persons for the transactions, and must register and account for the VAT on the services.
Agent/Intermediary
A person who acts on behalf of a principal for the purpose of bringing his principal into contractual relations with third parties.
Agricultural Machinery
Agricultural machinery is equipment or machinery used by a farmer entitled to the flat-rate addition in the course of his or her normal farming activities as defined in the Fifth Schedule to the VAT Act. This definition also covers commercial vehicles used in the course of the farming business.
Body of persons
Means any body politic, corporate, or collegiate, and any company, partnership, fraternity, fellowship and society of persons, whether corporate or not corporate.
Business
Means an economic activity, whatever the purpose or results of that activity, and includes any activity of producers, traders or persons supplying services, including mining and agricultural activities, and activities of the professions, and the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis.
Commercial and non-Commercial Vehicles
The term ‘commercial vehicle’ does not occur in VAT law, and therefore there is no strict definition of the term. Nonetheless, when a trader intends to purchase a vehicle, the questions are often asked "Is it a commercial vehicle?”, and “can I get my VAT back on it?" Traders are entitled to recover VAT on a number of different types of vehicles (to the extent that the vehicles are used for business purposes). It is these which are often referred to as ‘commercial vehicles’, and this term denotes vehicles that are deductible for VAT, i.e., any trader registered for VAT may reclaim the VAT charged to him or her on the purchase or hire of the vehicle.
Whether a trader can reclaim VAT on the purchase of a vehicle depends on four things:
- Is the trader registered for VAT and generally entitled to claim it back?
- Is the vehicle to be used for the purposes of a VAT-registered business?
- Is the vehicle of a category that allows a repayment to be made?
- Was VAT charged on the sale of the vehicle?
We will assume that the answer to questions (1) and (2) is 'Yes', and deal with questions (3) and (4) below.
Vehicle Categories
VAT legislation does not generally allow a repayment of VAT to any person who purchases (other than as stock-in-trade) any motor vehicle designed or constructed for carrying people by road. Nor is any VAT repayment allowed in respect of sports motor vehicles, estate cars, station wagons, motor cycles, motor scooters, mopeds and auto cycles whether or not they are designed and constructed for carrying people by road. However, repayment may be allowed in respect of vehicles designed and constructed for the carriage of more than 16 persons (inclusive of the driver), invalid carriages and other vehicles of a type designed for use by invalids and infirm persons.
For practical purposes, an attempt has been made to match the VAT legislation to the VRT registration categories. Motor vehicles are divided into a number of different categories for VRT purposes. Vehicles may be liable to different rates of VRT and different registration procedures depending on the category. Vehicles used for commercial purposes will generally come within Categories B and C, and will be liable to VRT at lower rates than Category A vehicles. Further details of the VRT Categories are available on the Revenue website.
Vehicles within VRT Categories B & C, such as vans, lorries, pick-ups and crew-cabs are generally deductible for VAT, and these are often referred to as commercial vehicles for VAT purposes. However, buses or minibuses suitable for carrying between 12 and 16 persons (including the driver) are not generally deductible for VAT, although they come within Category C. (Buses or minibuses are not usually deductible in any case, as they are normally used for the exempt activity of carrying passengers. However, for example, a company that purchased a bus, suitable for carrying more than 16 persons, to transport its own staff between worksites would be entitled to reclaim some or all of the VAT.)
Vehicles that come within VRT Category A [which includes cars (saloons, estates, hatchbacks, convertibles, coupes, MPVs, Jeeps, etc.) and minibuses with less than 12 permanently fitted passenger seats] are not generally deductible, and neither are motorcycles, motor scooters or similar vehicles of all kinds. The only traders entitled to reclaim VAT on these vehicles are those who purchase them as stock-in-trade, for use in a driving school, or for use in a car hire business.
Vehicles that come within VRT Category D, and other vehicles not in Categories A, B, or C may be deductible, depending on whether the purchasers are registered for VAT and the uses to which the vehicles are put.
Purchasing & selling commercial vehicles
Where a dealer (or other VAT-registered trader) sells a commercial vehicle to a VAT-registered purchaser, the purchaser will normally seek to recover the VAT element of the purchase price. A trader may only reclaim VAT charged to him or her on the purchase of a commercial vehicle if the seller issues a VAT invoice that allows a VAT deduction (a 'normal' VAT invoice).
If a motor dealer sells any vehicle, that would otherwise be deductible, through the ' Special Scheme for second-hand motor vehicles' then the dealer must issue an invoice containing an endorsement specifically disallowing any right for the purchaser to deduct VAT. If a dealer issues a ‘normal’ invoice in respect of a vehicle in the Special Scheme, this has the effect of taking the vehicle out of the Scheme, and the dealer will need to make an adjustment for any residual VAT previously claimed.
Where a VAT-registered trader sells a vehicle, by way of trade-in or otherwise, on which VAT has been claimed back, the trader must issue a VAT invoice, and account for VAT on the sale.
Consideration
Usually means money received by a supplier in exchange for the supply of goods or services but may be in the form of bartered goods or services or release from an obligation etc.
Credit
Under the VAT system a taxpayer is entitled to reclaim VAT borne by him/her in the course or furtherance of business, subject to certain limitations. A VAT credit is when this input VAT is reclaimed or set off against VAT due on supplies.
Deductible VAT
VAT borne on purchases, importations or intra-Community acquisitions which can be reclaimed or set off against VAT liabilities.
Distance sales
Distance selling in the Single Market arises when a supplier in one EU Member State sells goods to a person in another Member State who is not VAT registered and the supplier is responsible for delivery of the goods. It includes mail-order sales and tele-sales.
ECJ
European Court of Justice
Election
An election case is a trader who registers although not obliged to do so e.g. a shop under the registration limit or a plumber under the services limit or a farmer regardless of his/her turnover.
Establishment
Means any fixed place of business, but does not include a place of business of an agent or a person unless the agent has and habitually exercises general authority to negotiate the terms of and makes arrangements on behalf of the person or has a stock of goods with which he regularly fulfils on behalf of the person, agreements for the supply of goods.
Exempt activity
A supply of goods and services which are listed in the First Schedule (see Appendix A and Section 1 of the VAT Act).
Export
The supply of goods to a destination outside the European Union.
Farmer
A farmer for VAT purposes is someone who engages in crop production and/or general stock farming and/or forestry and/or fish farming and whose supplies consist of agricultural produce produced by him/her and/or agricultural services provided by him/her.
Fixtures
Goods which have become attached to buildings in such a way that they cannot be removed without substantial damage being caused to the goods themselves or to the buildings to which they have become attached.
Flat-rate farmer
A farmer who is not an accountable person (or if he/she is an accountable person only because of the receipt of Fourth Schedule services or intra-Community Acquisitions and is registered for that activity alone.)
Fourth Schedule services
The Fourth Schedule which sets out the services which are taxable by reverse charge when received for business purposes from outside the State.
Goods
All movable and immovable objects, but does not include things in action or money and references to goods include references to both new and used goods. The term includes electricity, gas and any form of power, heat, refridgeration or ventilation.
Immovable goods
Land
Imports
The importation of goods from outside the EU either directly or through another EU Member State where VAT has not been charged.
Imports of Motor Vehicles
Importing a vehicle means bringing it into the State from any place outside the European Union. VAT is due on imports at the point where they enter the EU, and is normally paid directly to Customs before the goods are released. Imports include vehicles that enter the EU in another country and are trans-shipped from there to Ireland.
Independently
'Independently', in relation to a taxable person excludes a person who is employed or who is bound to an employer by a contract of employment or by any other legal ties creating a relationship of employer and employee as regards working conditions, remuneration and the employer’s liability.
Input tax
VAT incurred on the purchase or importation of goods or services or intra-Community acquisitions of goods. It may in certain circumstances be deductible.
Intermediary
Intra-Community acquisitions
An 'intra-Community acquisition' of goods means movable goods supplied by a VAT-registered person in an EU Member State to a person in another EU Member State who is not a private individual and which have been dispatched from one EU Member State to another EU Member State as a result of the supply. A new means of transport received from another EU Member State is always regarded as an intra-Community acquisition.
Intra-Community Acquisitions of motor vehicles
An intra-Community acquisition is a transaction that results in a person in Ireland being obliged to account for Irish VAT on a vehicle purchased or otherwise acquired from a person in another EU Member State. This happens in the case of:
- Any 'new means of transport' supplied by any person, including a private individual, in another Member State and dispatched or transported by them, or by the purchaser, into the State. This includes a 'new means of transport' that enters the EU as an import in a Member State other than Ireland, but is transported on to Ireland. A 'new means of transport' is always liable to VAT in the country where it is to be used, regardless of where, by whom and from whom it is purchased.
- Any other means of transport supplied by a VAT registered person in any other Member State and dispatched or transported by them to a person carrying on business in Ireland, but not including any such vehicle sold under the Special Scheme or Margin Scheme for second-hand goods in that Member State. These are liable to VAT in the country where the supplier is located.
An Information leaflet on intra-Community acquisitions is available on the Revenue website at:
EU Intra-Community Acquisitions.
Intra-Community supply
Supplies of goods to a person registered for VAT in another EU Member State.
Intra-Community Supplies of motor vehicles
An intra-Community supply is a transaction that allows a VAT-registered trader in Ireland to charge 0% VAT on the supply of a vehicle to another EU Member State. This applies where a vehicle is dispatched or transported to a VAT-registered trader carrying on business in the other Member State, but NOT INCLUDING any such vehicle sold under the Special Scheme for second-hand vehicles. These are liable to VAT in Ireland. Where a ‘new means of transport’ is supplied by any person, including a private individual, in Ireland and dispatched or transported by them or by the purchaser to another Member State, then there is a liability to VAT in that Member State as an intra-Community acquisition there. The purchaser will be entitled, on proof that VAT was paid in the other country, to a refund of any Irish VAT paid on the purchase of the vehicle. An Information leaflet on intra-Community Supplies is available on the Revenue website at: EU Intra-Community Supplies.
Livestock
Live cattle, horses, sheep, goats, pigs and deer.
Member State
A Member State is a country that is a full member of the European Union (EU), and therefore part of the European VAT system.
Motor Dealer
A Motor dealer is a person who has a business in the buying and selling of cars. Motor Dealers will generally be registered for VAT (taxable dealer), and may also be authorised to trade in unregistered vehicles (authorised dealer).
- Taxable Dealer: A Taxable Dealer is a VAT-registered person whose business is the buying and selling of motor vehicles and/or agricultural machinery on his or her own behalf, or on behalf of others. Dealers must register for VAT when their turnover exceeds, or is likely to exceed, €75,000 (increased from €70,000 w.e.f. 12/05/08) in any 12-month period. A person can be a taxable dealer for VAT purposes without being an Authorised Dealer (see next paragraph) for VRT purposes.
- Authorised Dealer: An Authorised Dealer is a motor dealer who is granted authorisation to deal or trade in unregistered or foreign-registered vehicles. These dealers are issued with a TAN (Trader Account Number) by the local Revenue District. Details of the application process and requirements for the authorisation of motor dealers are available on the Revenue website, which also contains a Guide to Methods of Payment for VRT Traders. Authorisation and possession of a TAN number only affects the way in which the dealer operates VRT, not VAT.
Movable goods
Goods other than immovable goods.
New Means of Transport
The term !new means of transport! refers to vehicles which are less than a specified age, or have travelled less than a specified distance. It is a concept in European VAT law, and is significant only when calculating VAT liability for vehicles transported into a Member State from another Member State or non-EU country. It is important to note that a vehicle can have been owned by one or more persons, or registered in one or more countries, and still be taxable as a 'new means of transport' if it is moved from one country to another. The following vehicles are ‘new means of transport’:
- A motorised land vehicle with an engine cylinder capacity of 48 cubic centimeters or a power exceeding 7.2 kilowatts which was supplied 6 months or less after the date of first entry into service; or has travelled 6,000 kilometres or less.
- A vessel exceeding 7.5 metres in length which was supplied 3 months or less after the date of first entry into service; or has sailed for 100 hours or less
- An aircraft with a take-off weight exceeding 1550 kilogrammes which is intended for the transport of persons or goods and which was supplied 3 months or less after the date of first entry into service; or has flown for 40 hours or less .
In the case of motor vehicles, the ‘date of first entry into service’ is generally the date on which the vehicle was registered, unless the registration was delayed for any reason. If a vehicle with any of the specifications set out above is brought into Ireland, then the person bringing it in is liable to pay Irish VAT. This is normally paid at the same time as the vehicle is registered in Ireland. It is important to note that the operative date of supply, when determining whether a means of transport comes within the time limits, is the date on which it was purchased by the current owner. The distance travelled, however, is calculated by reference to when the vehicle arrives in Ireland. For example;
- If a person purchases a 4-month old car in the U.K., and brings it into Ireland when it is 7 months old, then at the time of supply it was less than 6 months old. Regardless of the distance travelled, this vehicle is a new means of transport, and is liable to Irish VAT
- If a person purchases a 7-month old car in the U.K., which, at the time of supply in the U.K. had travelled only 5,000 kilometres, but had travelled 6001 kilometres in total by the time it arrived in Ireland, the vehicle is not a new means of transport.
New Motor Vehicle
Unlike the technical term ‘new means of transport’, there is no definition in VAT law for the standard concept of a new motor vehicle, as distinct from a used or second-hand vehicle. For the purposes of this leaflet, a new motor vehicle should generally be regarded as one which has not been owned by any person other than the manufacturer, distributor(s) and authorised dealer(s). However, where a dealer has registered a vehicle in his or her own name and subsequently sells that vehicle, it must be treated as a second-hand vehicle and sold through the special scheme, even if there have been no other owners.
Private Individual
For the purposes of this leaflet, a private individual is a person who is acting in a non-business capacity in relation to the purchase or sale of a vehicle. This includes people who are not in the motor trade or any other trade involving the purchase or sale of vehicles. It also includes any person who may be in such a trade but who is buying or selling his or her own personal vehicle. For example, a VAT-registered self-employed haulier bringing in a car from the U.K. for his own personal use will be treated as a private individual for that transaction.
Person
The word person does not refer simply to an individual but also to companies, PLC’s, partnerships, trustees and unincorporated bodies of persons.
Postponed accounting system
This term is generally associated with the deferment of payment of VAT at importation by arrangement with Customs. The term is also used for deferment of accounting until the next VAT return in the case of intra-Community acquisitions.
Qualifying activities
This term, used in Section 12 (1) of the VAT Act, refers to activities in respect of which a person who would not otherwise be entitled to reclaim VAT may claim a deduction for VAT borne on purchases.
Qualifying Vehicles
A qualifying vehicle is one that qualifies for a deduction of residual VAT under the Special Scheme for second-hand motor vehicles. Essentially, a qualifying vehicle under the Scheme is
- one that is sold or traded-in to the dealer by a person who was not entitled to deduct any VAT in relation to the original purchase of that vehicle; or
- a vehicle which is sold or traded-in by another dealer who took a deduction of residual VAT on his or her purchase of that vehicle.
A dealer who purchases a qualifying vehicle may claim the residual VAT on the vehicle, and on selling the vehicle must issue an invoice containing an endorsement disallowing any deduction of VAT to the purchaser.
Registration for VRT
Each EU Member State (and every other jurisdiction) maintains a register of motor vehicles. In the context of this leaflet, registration for VRT means the registering of a vehicle with a Vehicle Registration Office in the State, including the payment of any VRT. A vehicle is regarded as unregistered in the State even if it has been registered in another jurisdiction.
Residual VAT
Residual VAT is the portion of the price paid by a motor dealer for a car that represents unrecoverable VAT paid by a previous owner. For example, if a private individual buys a car, he or she is not entitled to reclaim any VAT. If this car is then traded in or sold to a dealer, the dealer may calculate the VAT on the basis of the price paid for the car, and claim the ‘trapped’ or residual VAT frm Revenue. Residual VAT may only be reclaimed by a dealer where a vehicle is to be sold under the Special Scheme for second-hand motor vehicles.
Reverse charge
A reverse charge occurs when the recipient of a supply is obliged to account for VAT e.g. on a intra-Community acquisition, a received Fourth Schedule service, goods installed or assembled for him/her by a non-resident supplier or where a principal contractor is in receipt of construction services from a sub-contractor.
Second-Hand or Used Motor Vehicle
As with ‘new motor vehicle’, there is no definition in VAT law for a second-hand, or used, vehicle. For the purposes of this leaflet a second-hand or used vehicle may be regarded as a motor vehicle, agricultural machine, etc. that has had at least one previous owner, including the current owner, but not including a motor dealer who held the vehicle, etc. as stock-in-trade. However, where a dealer has registered a vehicle in his or her own name and subsequently sells that vehicle, it must be treated as a second-hand vehicle and sold through the special scheme, even if there have been no other owners. It is important to note that a vehicle may be used or second-hand and still come within the definition of ‘new means of transport’ above.
Self-accounting
This term is essentially that of accounting for VAT on a reverse charge or a self-supply.
Self-registered Vehicle
A self-registered vehicle is one that has been registered for VRT in the name of the dealer or distributor. This happens where a vehicle is used as a demonstration model by a dealer, or where it is otherwise taken out of stock-in-trade. If a vehicle is sold, or provided for the use of a person other than the dealer or distributor, it should not be self-registered, but should be registered in the name of the purchaser or user. When a vehicle, other than a commercial vehicle, is self-registered, any VAT reclaimed on the purchase of the vehicle must be returned to Revenue. If the vehicle is subsequently sold, it must be sold through the Special Scheme for second-hand motor vehicles. The dealer can reclaim an amount of residual VAT equal to the amount of VAT charged on the sale.
Self-supply
A self-supply of goods arises when an accountable person applies business goods for use in an exempt or partially exempt activity or appropriates them to a non-business use or disposes of them free-of-charge. VAT due on a self-supply is not deductible.
Service
Any supply which is not a supply of goods.
Special Scheme for Second-Hand Motor Vehicles
The Special Scheme for Second-Hand Vehicles allows a dealer to reclaim the notional or residual VAT in the price of a car he or she purchases from a private individual, and sets out the rules governing the subsequent sale of the vehicle.
Taxable goods
In relation to any supply, intra-Community acquisition or importation, means goods, the supply of which is not exempted.
Taxable period
A period of two months beginning on the first day of January, March etc.
Taxable person
A person who independently carries out any business in the State.
Taxable service
Means a service the supply of which is not an exempted activity.
Threshold
When the value of a trader’s supplies exceeds or is likely to exceed a set monetary value they are obliged to register for VAT. This limit is often called the threshold.
Trader
A person who engages in commercial activity.
Trade-in
A trade-in is the sale of a vehicle to a dealer to reduce the cost of the purchase of a (usually more expensive) vehicle from the dealer. For VAT purposes, these are treated as two separate transactions – a sale of the trade-in to the dealer, and the subsequent purchase of another vehicle.
Undisclosed agent
A person who, while purporting to act on his/her own behalf concludes agreements in his/her own name but on the instructions and for the account of another person. For VAT purposes an undisclosed agent is deemed to act as a principal.
Value Added Tax (VAT)
Value Added Tax is chargeable on the supply of goods and services. All traders who exceed the relevant turnover thresholds are required to register for and charge VAT. A liability to VAT also arises in the case of a new means of transport brought into the State, which is payable on registration of the vehicle, along with the VRT.
Vehicle Registration Tax (VRT)
Vehicle Registration Tax is chargeable on the registration of a motor vehicle in the State. All motor vehicles in the State, other than those brought in temporarily by visitors, must be registered with the Revenue Commissioners before being licensed for road tax purposes.