Value added tax (VAT) is a common sales tax applicable in most European Union countries, including Ireland. This is a tax charged at every stage of the supply chain, from production to retail. The purpose of VAT is to tax added value at every stage of the production and distribution process.

In Ireland, as in other EU Member States, VAT plays a key role in the tax system, ensuring fair taxation on consumption and facilitating the free movement of goods and services within the internal market. Thanks to the system of deducting input VAT from output VAT, enterprises do not bear any tax burden at the stage of production and distribution, which allows them to avoid double taxation.

Irish VAT numbers

VAT numbers issued by the Republic of Ireland can be identified by their format, which consists of the IE country code and eight or nine characters, one or two of which are alphabetical. Irish VAT number can take one of the following forms: IE1X3456X, IE1234567X or IE1234567XX.

The structure of these numbers facilitates the identification of companies registered for VAT purposes in Ireland, which is important for the correct settlement of intra-community transactions and for ensuring the transparency and reliability of the tax system. The unique design of VAT numbers also allows for easy verification of their authenticity, which helps fight tax fraud and abuse.

Obligation to register for VAT in Ireland

In the Republic of Ireland, companies and individuals carrying on a business are required to register for VAT if their annual turnover with a calculated accounting period based on the calendar year exceeds certain values. The table below shows the turnover limits beyond which VAT registration is required:

• Sale of goods €75,000
• Provision of services €37,500
• Sale of goods and services (goods > 90% of turnover) €75,000
• Mail order and distance sales €35,000
• Acquisitions from other EU countries €41,000

It is worth noting that these limits may change, so it is always worth checking the current regulations. The VAT registration obligation aims to ensure transparency and reliability of the tax system, as well as to enable proper tax settlement by enterprises. Failure to register for VAT purposes, despite exceeding turnover limits, may result in penalties and financial sanctions.

The importance of VAT

VAT plays a key role in the tax systems of Ireland and other EU countries. It is an indirect tax that is levied at every stage of the supply chain, from production to retail. Businesses charge VAT on their products or services and then pay it to the tax office. Final consumers bear the real burden of VAT because it is included in the final price of products and services. Thanks to this system, VAT has become one of the main sources of budget revenues in many European countries, enabling the financing of various government programs and public investments.

VAT aims to ensure fair taxation on consumption and to facilitate the free movement of goods and services within the EU internal market. The VAT system is based on the principle of tax neutrality, which means that companies do not bear the final tax burden and the tax is passed on to the final consumer. Thanks to this mechanism, VAT does not distort competition between enterprises because all market participants are treated equally and fairly.

Moreover, the VAT system facilitates the monitoring and control of flows of goods and services between EU countries, which helps to combat tax fraud and abuse. Enterprises are obliged to keep detailed documentation of VAT transactions, which allows tax authorities to verify the correctness of settlements and identify possible irregularities.