Interest and Penalties
This Section sets out the rates of interest chargeable in certain circumstances. It also sets out the various penalties which can be imposed in various circumstances.
- Interest on late payment of VAT and on overpayment of a VAT refund
- Interest on underpayment in direct debit scheme
- Interest on estimates and assessments
- Interest on refunds of tax by Revenue
- Penalties generally
- Deliberate and careless behaviour
- Penalties for deliberate or careless behaviour
- Time limit
- Goods for export
- Forfeiture of goods
- Customs Acts Provisions
1. Interest on late payment of VAT and on overpayment of a VAT refund
Where VAT becomes payable by an accountable person but is not paid, simple interest is charged at a rate of 0.0274% per day, or part of a day, during which the amount remains unpaid.
Simple interest on a daily basis at that rate is also charged in cases where a VAT refund had been made but either:
- no amount of VAT was properly refundable, or
- the amount of VAT refunded was greater than the amount which was properly refundable.
It should be noted that if an expression of doubt is accepted by Revenue as genuine, interest is not applied to any tax payable on the resolution of the matter in doubt (see VAT Rates - Letter of expression of doubt ).
2. Interest on underpayment in direct debit scheme
Simple interest of 0.0274% on a daily basis is also charged on any balance of VAT which has been underpaid following the making of VAT payments under the direct debit scheme where more than 20% of the accountable person's actual liability for that accounting period has been underpaid. For the purposes of calculating and charging interest, the balance will be deemed to have been payable on a day which is 6 months prior to the final day for making the annual VAT return.
3. Interest on estimates and assessments
VAT recoverable by Revenue by means of an estimate issued under the terms of Section 110 of the VAT Act for failing to make a VAT return is regarded as falling due for the taxable period to which the notice or estimate relates. Interest at a daily rate of 0.0274% is calculated from the date on which the amount becomes payable.
VAT recoverable by Revenue by means of an assessment issued under Section 111 of the VAT Act for an underpayment by or an overpayment to an accountable person is regarded as falling due for the taxable period (or later/latest taxable periods if there is more than one) to which the notice of the assessment relates. This applies whether a notice of appeal under Section 111 has been received. Interest is, therefore, calculated from the date on which the amount becomes payable and is chargeable at a daily rate of 0.0274%, during which the amount remains unpaid.
4. Interest on refunds of tax by Revenue
Revenue may pay interest on refunds of VAT to a claimant in two circumstances i.e. where there is a mistaken assumption in the operation of the tax made by Revenue or where there is a delay of more than 93 days in processing a fully completed claim. Simple interest is calculated from the date on which the amount becomes payable and is chargeable at a rate of 0.011% per day, or part of a day, during which the amount remains unpaid. Interest will not be paid where it amounts to less than €10 or where any interest is paid due to the provisions of other legislation.
Mistaken assumption in the operation of the tax
Where a mistaken assumption in the operation of the tax by Revenue results in a refundable amount of VAT being due to a claimant, interest on that amount is payable to the taxpayer. 'Mistaken assumptions in the operation of the tax' cover situations where there is a re-interpretation of an existing provision. This could arise, for example, from a decision by the Irish courts or by the European Court of Justice. It could also arise from a change in interpretation made by Revenue.
Where a mistaken assumption in the operation of the tax is made, the interest is calculated from:
- in the case of an overpaid amount, from the date of receipt of that amount, and
- in the case of any other refundable amount, either from
- the 19th of the month following the taxable period in which the claimant would have been entitled to receive the amount, or
- where a VAT return is required, from the date of its receipt,
to the date the amount is repaid by Revenue.
Revenue is also obliged to pay interest if a VAT repayment has not been made after the expiry of 93 days from the date of receipt of a valid claim for repayment. The claimant must provide Revenue with whatever details or records they request to validate the claim. Interest will be paid from the date of expiry of the 93 days up to the date the repayment is made, excluding the time correspondence is ongoing with the taxable person concerning the claim. It should be noted that the provision does not cover simple arithmetical errors or cases where Revenue withhold a refund pending the filing of an outstanding tax return by the taxpayer.
5. Penalties generally
Where there is no agreement with a taxpayer on the amount of a penalty due or where an agreed penalty is not paid, the taxpayer is given an opportunity to have a court examine whether the taxpayer is liable for the civil penalty for contravention of the tax legislation. Where the person is found by the court to be liable to pay a penalty, the penalty may be recovered in the same way as tax is recovered. There is nothing, however, to prevent a person from agreeing with, and paying a penalty without the intervention of the court.
Penalties shall be imposed for the following:
- failure to register as an accountable person - €4,000
- failure by a flat-rate farmer to issue an invoice showing the flat-rate addition - €4,000
- failure to keep proper books and records - €4,000
- failure to comply with invoicing requirements - €4,000
- failure to charge the tax and pay the tax over to Revenue - €4,000
- failure to furnish a quarterly statement of intra-Community supplies (VIES return) to the Revenue Commissioners - €4,000
- issue of a VAT invoice by a non-registered person - €4,000
- unauthorised charge of a flat-rate addition - €4,000
- in the case where the failures or acts referred to above are carried out by a body of persons the secretary of the body is liable for the payment of a separate penalty - €4,000
- wilfully obstructing or delaying an officer authorised by the Revenue Commissioners in exercising his/her powers - €4,000
- preventing or obstructing a person authorised by the Revenue Commissioners to inspect property for the purposes of valuing the property for VAT purposes - €4,000
- supplying taxable goods and services in contravention of the requirement of security for the protection of the Revenue (Section 109 bond) in respect of each such supply - €4,000
- assisting in making incorrect returns, invoices, credit notes etc - €4,000
Reductions in these penalties apply in certain circumstances of co-operation and qualifying disclosure.
6. Deliberate and careless behaviour
The concepts of ‘fraud’ and ‘negligence’ for the purpose of administering penalties have been superseded by the concepts of ‘deliberate’ and ‘careless’ behaviour with effect from 24 December 2008. The concepts of ‘deliberate’ and ‘careless but not deliberate’ have been introduced into VAT law.
7. Penalties for deliberate or careless behaviour
As stated above, with effect from 24 December 2008 the concepts of ‘fraud’ and negligence’ for the purpose of administering penalties have been superseded. In cases where a person deliberately furnishes an incorrect return or makes an incorrect claim or declaration, VAT law now provides for penalties equal to the difference between the amount of tax paid or claimed and the amount properly paid or refundable. Where a person deliberately fails to furnish a return then he/she is liable for a penalty equal to the difference between the amount of tax paid for the relevant period, before the start of an investigation by Revenue, and the amount properly payable. These fines may be reduced to varying degrees depending on whether the person carelessly but not deliberately failed to comply, co-operates fully with Revenue, the timing of that co-operation in certain circumstances, whether a person makes a qualifying disclosure or a prompted or unprompted qualifying disclosure of the breach. (These terms are defined in the VAT Act.) The significance of the relative levels of tax underpaid is also recognised for the purposes of reduction of the penalties, as is the issue of second, third and subsequent qualifying disclosures within certain time frames.
Where a person referred to above is a body of persons the secretary is liable to a separate penalty of €1,500 or, in the case of deliberate behaviour, €3,000.
In the case of the recovery of penalties from the estate of a taxpayer after death, penalties will only be recovered where the person either agreed in writing to the penalties or a court determined before the person’s death, that the person was liable to the penalties.
Where a person deliberately issues or makes use of a VAT invoice, credit note etc., number, account, bank statement and/or record then that person becomes liable to a penalty of €5,000. Where that person acts carelessly in such circumstances then the penalty is €3,000.
A penalty of €4,000 is provided for in a case where a person improperly procures the importation of goods without payment of tax in circumstances in which VAT is chargeable. The person must also pay to Revenue the amount of tax that should have been paid on the importation of the goods. Penalties for breach of Customs law may also apply. The goods are also liable to forfeiture.
Where a person uses an incorrect VAT number to acquire goods VAT free in another Member State that person becomes liable for a penalty of €4,000 and in addition, the VAT which would have been chargeable on the Intra-Community acquisition of those goods.
Where VAT has been remitted or repaid for the purposes of the Section 56 VAT Scheme and they are found in the State after the date on which they were alleged to have been transferred out of the State or any condition of the Revenue under the Scheme has not been complied with, then the goods are liable to forfeiture and the tax which was remitted or repaid becomes payable forthwith by the person to whom the goods were supplied or any person in whose possession the goods are found and the provisions of the Taxes Consolidation Act, 1997 ( as amended) also apply. Revenue may waive all or part of that tax if they see fit.
8. Time limit
The time limits for recovering penalties (normally six years) do not apply to proceedings for deliberate or careless behaviour.
9. Goods for export
Where tax on the supply of goods has been remitted or repaid on the basis that the goods have been or are to be exported and those goods are later found within the State without having been so authorised they will become liable to the general Customs powers of seizure and forfeiture which apply in relation to smuggled goods.
10. Forfeiture of goods
VAT law provides for the seizure and forfeiture of goods in certain cases, including the illicit circulation of zero-rated goods in the Community. Goods which are being supplied by an accountable person who has not applied to be registered for VAT, are also liable to seizure and forfeiture. Where the goods have been seized or detained a decision must be made within two months of the date of the seizure or detention as to whether the goods are liable to forfeiture and if they are not, they must be released.
Where the purchaser is not entitled to a VAT credit and fails to account for VAT in the State, forfeiture provisions apply to the intra-Community acquisition of new means of transport, including cars, yachts and boats when such goods are purchased VAT-free in another EU Member State (on the basis they are subject to VAT in the State).
11. Customs Acts Provisions
The provisions of the Customs Acts regarding forfeiture and condemnation of goods apply to goods liable to forfeiture under VAT law.
VAT law provides that an officer specially authorised by the Revenue Commissioners for the purpose, or a member of An Garda Síochána, may arrest a person where they have reasonable grounds to believe that a criminal offence in relation to tax (under the provisions of Section 1078 of the Taxes Consolidation Act 1997) has been committed by a person who is not established in the State or whom he/she believes is likely to leave the State.