Procurement of goods and services by the State, local authorities and bodies established by statute

This information leaflet which sets out the current practice at the date of its issue is intended for guidance only and does not purport to be a definitive legal interpretation of the provisions of the Value-Added Tax Act 1972 (as amended). This leaflet should be read in conjunction with the pdfRevenue VAT Guide July 2008 (PDF, 1.2MB), and VAT Information Leaflet Foreign Suppliers Doing Business in Ireland.

1. The purpose of this leaflet

1.1 The purpose of this leaflet is to set out the circumstances in which the State, local authorities and bodies governed by public law are to be charged VAT by the supplier on goods or services procured by them or are obliged to register and account for VAT on goods or services procured by them.

2. Scope of the terms 'the State, local authorities and bodies established by statute'.

2.1 The State, local authorities and bodies established by statute includes Government Departments, state sponsored bodies, An Garda Siochana, the Defence Forces, the Health Services Executive, public hospitals, enterprise boards, educational establishments (such as universities, institutes of technology, schools, VECs), local authorities including regional authorities, harbour authorities – in practice, the State and emanations of the State. These are not normally required to register for VAT in respect of supplies of goods or services by them but may be required to register and account for VAT in respect of goods and services received by them. For ease of reference in this leaflet they are referred to as public bodies.

3. Circumstances in which the supplier will be obliged to register for, charge and account for VAT on supplies to public bodies.

3.1 VAT is a tax on consumer spending and in the normal course is charged,collected and accounted for to Revenue by VAT registered traders on their supplies of goods and services in the State. Foreign traders who have an establishment in the State from which they supply goods are required to register for VAT. Traders supplying goods from a business in the State are obliged to register, charge and account for VAT where their annual turnover exceeds or is likely to exceed €75,000 but may register if under this amount if they so wish. Foreign traders who import goods from outside the EU for supply in the State are also obliged to register, charge and account for VAT. In such circumstances a public body will not have to self account for the VAT due but will merely pay the VAT along with the price of the goods to the supplier who will account to Revenue for the VAT due. Traders established in another member State of the EU who make intra-Community supplies to public bodies in the State are not required to register. Rather VAT is self accounted for by the public body. (see paragraph 7 below).

3.2 The general rule for services is that the supplier is obliged to register and account for VAT by reference to the place where s/he has her/his establishment. Because of the nature of certain services, when they are supplied across national boundaries this general rule will not apply and the supplier may be required to register and account for VAT in Ireland or the public body may be obliged to self account for the VAT. In other circumstances such as construction services received from either a trader established in the State it is the public body which will be required to account for the VAT due. The circumstances in which a public body is required to register and self account for VAT this are listed at paragraph 4 below and dealt with in detail in subsequent paragraphs.

4.Circumstances where public bodies are obliged to register and self-account for VAT

4.1 A public body is obliged to register and self-account for VAT in the following circumstances:-

  • where it is in receipt of Fourth Schedule services from abroad (see paragraph 5 of this leaflet);
  • where it acquires, or is likely to acquire more than €41,000 worth of goods from other EU Member States (intra-Community acquisitions) (refer to paragraph 9 of this leaflet);
  • where it is in receipt of goods which are supplied and installed/assembled (other than fixtures) by a non-established supplier;
  • where it is in receipt of cultural, entertainment, artistic or similar services from a person not established in the State.
  • where it is in receipt, as a principal contractor, of construction services supplied by a sub-contractor (see Paragraph 6 of this leaflet).

4.2 Where a public body is registered for VAT in respect of either the receipt of Fourth Schedule services, received cultural services or goods which are installed/assembled then it is obliged to account on all the received services and goods listed above and on intra-Community acquisitions, irrespective of the threshold.

4.3 Once registered for VAT, it will, in addition be obliged to self-account for VAT on receipt of valuation of or work on movable goods (including contract work) in cases where the goods are dispatched or transported out of the Member State where the valuation or work was physically performed. In addition, it will be obliged to self-account on intra-Community transport services supplied by a carrier not registered for VAT in the State. There is no entitlement to a refund of input VAT for public bodies registered for the purpose of accounting for VAT on received goods or services.

4.4 Where, exceptionally a public body is required to register and account for VAT on supplies of taxable goods or services by them, they will be entitled to a VAT credit in their return for VAT incurred on related inputs.

5. Fourth Schedule Services

5.1 This paragraph should be read in conjunction with VAT Information Leaflet 'Fourth Schedule Services'.

5.2 Where a public body is in receipt of Fourth Schedule services from a supplier in another Member State in circumstances in which VAT is not payable in that Member State in respect of the supply, or from a supplier outside the EU, it is obliged to account for VAT on the total invoiced value. The complete list of Fourth Schedule services is as follows:-

  1. transfers and assignments of copyright, patents, licences, trade marks and similar rights;
  2. hiring out of movable goods other than means of transport;
  3. advertising services;
  4. services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, data processing and provision of information (but excluding services connected with immovable goods);
  5. telecommunications services;
  6. radio and television broadcasting services;
  7. electronically supplied services;
  8. the provision of access to, and of transport or transmission through, natural gas and electricity distribution systems and the provision of other directly linked services;
  9. acceptance of any obligation to refrain from pursuing or exercising in whole or in part, any business activity or any such rights as are referred to in the first indent above.
  10. banking, financial and insurance services (including re-insurance and financial fund management functions, but not including the provision of safe deposit facilities);
  11. the provision of staff;
  12. the services of intermediaries who act in the name and for the account of a principal when procuring for him any services specified in the first six indents above.

The Finance Act 2007 provided for a change in the treatment of Fourth Schedule services received by Government Departments, local authorities and bodies established by statute, subject to a Commencement Order being made. This Order has not yet been made.

6. Public Bodies receiving construction services

6.1 From 1 September 2008 public bodies are required to register and self-account for VAT in their return on construction services received by them as principal contractors.

6.2 The new system applies to principal contractors and sub-contractors involved in construction operations to which Relevant Contracts Tax (RCT) applies (but excluding haulage for hire).

6.3 RCT applies when a principal contractor is obliged to deduct tax @ 35% from payments to a sub-contractor or would have to do so but for the fact that the principal contractor holds a Relevant Contracts Card (RCT 47) for that sub-contractor. Public bodies, including local authorities, who receive construction services are principal contractors for RCT purposes and the person who contracts to provide such services to a public body is regarded as a sub-contractor.

6.4 From 1 September 2008 the principal public body acting as a principal contractor accounts for the VAT on services received from a sub-contractor under what is known as the reverse charge.

  • The charge for services by the sub-contractor does not include VAT on the services.
  • The VAT registered sub-contractor or a non-established sub-contractor who is not registered for VAT issues an invoice to the principal, which shows all the same information as appears on a VAT invoice, except the VAT rate and the VAT amount. The invoice should include the VAT registration number of the sub-contractor.
  • The invoice should contain the statement "VAT ON THIS SUPPLY TO BE ACCOUNTED FOR BY THE PRINCIPAL CONTRACTOR". (Note 1)
  • The public body, as a principal contractor, pays the sub-contractor for the services. This payment should not include VAT.
  • If RCT is to be deducted, it should be calculated on the VAT-exclusive amount.
  • The principal contractor should include the VAT on the services received from the sub-contractor in his/her VAT return for the period in which the supply is made as VAT on Sales (T1). (Note 2)
  • Where entitled to do so, the principal can claim a simultaneous input credit in his/her VAT return for the period. (Note 3)

Note 1: If agreed by both the principal contractor and the sub-contractor the principal may issue the invoice.

Note 2: In the case of a payment in advance of completion of the supply, the principal will include the VAT on the payment in his/her VAT return for the period in which the payment is made.

Note 3: Principal contractor for RCT purposes includes local authorities, Government Departments and boards established by or under statute. Many of these bodies would not be entitled to VAT input credit.

7. Intra-Community acquisitions of goods

7.1 A public body which is otherwise registered for VAT or which acquires or is likely to acquire more than €41,000 worth of goods from other EU Member States in any continuous period of twelve months is obliged to account for VAT at the appropriate rate in respect of those acquisitions. The public body should furnish details of its VAT number in the State to the supplier who will then apply a zero rate of VAT to the intra-Community supply from his/her Member State. VAT must then be self-accounted for on the intra-Community acquisition of the goods here in the VAT return for the taxable period. Further detail is included in VAT Information Leaflet 'EU intra-Community Acquisitions'.

7.2 It should be noted that intra-Community acquisitions of new means of transport (i.e. motor vehicles, boats, planes) are always subject to VAT when they are bought into the State, even where the non-taxable entity is not otherwise registered for VAT. There are special rules for paying VAT on new means of transport and, in certain cases, on excisable goods also. Further detail is included in VAT Information Leaflet 'EU intra-Community Acquisitions'.

8. Cultural artistic, entertainment or similar services

8.1 Where a person not established in the State supplies cultural, artistic, entertainment or similar services to a public body in the State then the person, other than a person acting in a private capacity, who receives that service, must self-account for any VAT due. If it is a promoter or agent who receives the service then he/she will self-account for the VAT due. However, where a public body is in direct receipt of the services from a person not established in the State then it will be obliged to self-account for VAT due.

8.2 Where a public body owns a premises and allows a promoter not established in the State to supply cultural, artistic, entertainment or similar services on those premises, it must, not later than fourteen days before the event or performance is scheduled to begin, notify the appropriate Revenue District of the name and address of the promoter and details of the performance. Where these details are not furnished to the appropriate Revenue District, the public body may be made jointly and severally liable, with the promoter, for VAT due.

9. Intra-Community transport of goods

9.1 This paragraph should be read in conjunction with VAT Information Leaflet 'Transport of Goods and Ancillary Services within the EU'.

9.2 Where a public body is in receipt of intra-Community goods transport services from a haulier established in the State then it is the haulier’s responsibility to account for the VAT due. Where, however, the haulier is established in another member State then it is the public body which must self-account for VAT in the State under the reverse charge rule.

9.3 In the case of transport of goods in the State, other than as part of the intra-Community transport of goods, the VAT must be accounted for by the haulier.

10. Repair, valuation and contract work

10.1 Where goods are dispatched or transported to another Member State, where the valuation of, or work on, movable goods, including contract work is physically carried out, the supplier should apply a zero rate of VAT to his/her charge for the service in his/her own Member State and the public body must self-account for Irish VAT at the appropriate rate on the invoiced value of the service, on the return of the goods to the State. The public body must provide the supplier with its VAT number for inclusion on the invoice.

10.2 Contract work means the service of handing over by a contractor to another person of movable goods made or assembled by the contractor from goods entrusted to the contractor by that other person, whether or not the contractor has provided any part of the goods used

11. Importation of goods

11.1 Goods imported by public bodies into the State from outside the European Union are subject to VAT at the point of entry, at the appropriate rate (a special deferral scheme, however, applies to imports by Government Departments).

11.2 It should be noted however that VAT due on importations of goods by parcel post will be not be payable at the time of importation where the value of each such consignment is €260 or less. However VAT must be accounted for in box TI of the VAT 3 return for the period. The importers VAT number should be quoted on the customs declaration form or on the wrappers of the green label packets.

12. Invoices

12.1 Traders supplying taxable goods or services to Public Bodies are obliged to issue VAT invoices. They are likewise obliged to issue VAT credit notes and VAT debit notes where appropriate. However see 6.4 for invoices for received construction services.

12.2 VAT normally becomes due on the date of issue of a VAT invoice, or if no invoice issues, on the 15th day of the month following the receipt of the goods or services. In the case of EU intra-Community acquisitions VAT becomes due on the 15th day of the month following that during which the acquisition takes place or in case an invoice is issued before this date, at the time when the invoice is issued. In general, the rate applicable is that which applies to the supply of such goods or services in the State. (There is one exception to this in the case of the intra-Community acquisition of certain works of art, collectors items and antiques). VAT is generally chargeable on received supplies, including EU intra-Community acquisitions on the invoiced amount. In the case of imports VAT is chargeable on the invoiced amount plus insurance and freight charges.

12.3 In the case of payment made in advance of the completion of a supply on foot of an invoice from a sub-contractor for construction services, a principal contractor should account for VAT in its return in the period in which the payment is made.

12.4 In the case of a change in VAT rates traders have the same obligations in relation to the VAT rate to be charged on VAT invoices, VAT credit and VAT debit notes issued in respect of supplies to Public Bodies as applies to sales to VAT registered persons. The VAT treatment of supplies in relation to fixed interval payments, advance payments, existing contracts, continuous supplies of utilities, budget account sales, hire-purchase and other credit sales is similar to such supplies to VAT registered persons.

13. Rate of VAT

13.1 Public bodies are not, in the normal course, entitled to reclaim input VAT. Being registered for accounting for VAT in respect of received services ( construction services, Fourth Schedule services etc.) or goods ( intra-Community supplies) does not give an entitlement to a VAT credit. Therefore VAT is a cost to public bodies and differing rates indicated on tenders for similar supplies will need to be examined.

13.2 Rates can vary depending on the circumstances, for example photographic goods are normally subject to the standard rate but other rates may be applicable, depending on the circumstances. Information on this particular subject is available in the VAT Information leaflet Photography.

13.3 The correct rate of VAT appropriate to any supply can be ascertained by consulting the VAT Rates Subject Index, the VAT Guides, leaflets and other VAT information available on the Revenue website or their local Revenue District.

13.4 The rates of VAT are zero, reduced, standard, and special rates for farmers and livestock. It should be noted that banking, financial and insurance services mentioned at item number 10 of paragraph 5.2 above are included in the exemptions from VAT. In general, the rate applicable to intra-Community acquisitions is that which applies to the supply of such goods in the State. (There is one exception to this in the case of the intra-Community acquisition of certain works of art, collectors items and antiques).

14. Rate of exchange

Where acquiring goods or services from an EU Member State which is not part of the EURO zone the rate of exchange to be used is the rate applicable when the tax becomes due, which is normally on the fifteenth day of the month following that in which the intra-Community acquisition occurs. The rate of exchange can be, however, as with imports from outside the EU which are expressed in a foreign currency, that determined on a calendar month basis under the monthly rates of exchange system for customs valuation purposes. Information on monthly rates of exchange is available from any Customs office.

15. No entitlement to recover VAT

Public bodies which are registered for VAT only in respect of accounting for VAT on received goods or services are not entitled to recover the VAT they have accounted for.

16. VAT Number

A VAT number will be issued on application to a Public Body where it engages in the receipt of taxable goods or services as outlined above. Any VAT due for any other such received taxable goods or services will be accounted for by reference to this number. Where there is no VAT to be accounted for in any taxable period then a nil VAT return must be filed. It is open to a body to apply to have its VAT number cancelled where it considers that will not engage in any further taxable events.

17. Intrastat

Public bodies which acquire more than €191,000 worth of goods per annum from other Member States are required to make a monthly statistical return in respect of these acquisitions. Details of this requirement are contained in the VIES and Intrastat Traders Manual¸ which is available from the VIMA Office at vimahelp@revenue.ie

Further information

Enquiries regarding any issue contained in this Information Leaflet should be addressed to the Revenue District responsible for the taxpayer's affairs. Contact details for all Revenue Districts can be found on the Contact Details page.

This leaflet is issued by

VAT Interpretation Branch,
Indirect Taxes Division,
Dublin Castle.

January 2010

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