Intra-Community supplies (ICS)
Issues for suppliers to be aware of
Suppliers are advised to take special care. Suppliers should ensure that the five conditions for zero-rating are met for sales and deliveries of goods to other Member States. Doubt can arise where, for example:
- the customer is not previously known to the supplier
- the customer arranges to collect and transport the goods
- the customer's transport arrives at the supplier's premises without advance notice or correspondence
- the customer pays in cash
- the type or quantity of goods being purchased is not consistent with commercial practice bearing in mind the destination of the goods.
Where one or more of these factors are present, the supplier needs to proceed with particular caution.
If any doubt arises, the supplier should charge Irish Value-Added Tax (VAT). If the conditions for zero-rating are subsequently established, the customer is entitled to recover the VAT paid to the supplier from the supplier. The supplier can then make an adjustment in their VAT return for the period.
The supplier may be in doubt about the validity of the VAT registration number provided by the customer. In such cases, the VAT registration number provided by the customer should be verified by the supplier using the VAT number validation system. The VAT registration number provided by the customer should be verified before applying the zero-rating.
Suppliers should take all reasonable steps to verify that the conditions for zero-rating are satisfied. Where a supplier has taken such steps, that supplier will not be penalised if it subsequently transpires that a problem has arisen with a particular consignment. However, the tax due at the Irish rate will be recovered from any supplier who has failed to take all such reasonable steps. Please see How to protect your business from becoming involved in VAT fraud.
Penalties for fraudulent claims
There are penalties for making fraudulent claims for zero-rating.
The penalties are as follows:
- Seizure and forfeiture of zero-rated goods which have not been dispatched or transported outside the State.
- The use of an incorrect VAT number for each transaction is liable to a penalty of €4,000. This penalty is in addition to the amount of tax which would be chargeable.
- You may be subject to arrest.
- Civil and criminal penalties ranging up to €126,970 and imprisonment for up to five years.
Next: Supplies of excisable goods to other Member States