With the global economy expanding on a daily basis there is more and more scope for businesses to source goods and services from outside of their own State. The internet has also assisted in the growth of the global economy making it easier for businesses to source goods and services from other countries, however VAT may still be paid on such goods and services, even though you do not operate in that state.
In a bid to facilitate a simplified recovery procedure for VAT the EU VAT Directive 2008/9/EEC or the Thirteenth Council Directive allows for a person/company engaged in a business in one member state to reclaim VAT incurred in another member state, once they are not operating in that state. For example, if a French company, which did not operate in Ireland, purchased goods or services from Ireland, which were subject to Irish VAT, the VAT on those goods could be reclaimed by the French company.
Reclaim of VAT by businesses within the EU
From 1 st January 2010 all reclaims of VAT under the EU directive are required to be made through an Electronic VAT Refund (EVR). For the purpose of an example let’s take the above French company which purchased goods from Ireland. In this example the following conditions would apply to the reclaim of VAT:
- The goods and services purchased in Ireland, on which the reclaim is made, must be goods and services that would have had tax applied if the business was conducted in Ireland.
- The goods purchased must not be for use within Ireland or be motor vehicles hired for use within Ireland.
- The trade carried on in France must be a trade that would be VAT-liable if it were to be carried on in Ireland.
- The French company will be required to be registered for VAT for the full refund period being claimed. (i.e. if the French company are submitting a reclaim for January to December 2013 they would be required to be registered for VAT for that full period).
- Applications must be made by 30 th September of the calendar year directly following the year for which the claim is being made. For example, a claim for the year ended 31 st December 2013 will be required to be submitted on or before 30 th September 2014.
- Applications for a reclaim of VAT would be submitted by the French company to the French authorities, who would forward the reclaim, electronically, to the Irish Revenue Commissioners.
Reclaim of VAT for businesses outside of the EU
The EU directive also governs for the reclaim of VAT for businesses which operate outside of the EU; however the following conditions will apply to such businesses:
- Written proof of economic activity issued by the competent authority of that state must be provided.
- Applications for repayment are made through a paper Form VAT 60OEC – Application for Refund of Value Added Tax (VAT) by a taxable person not established in Ireland. as
the EVR is not available to businesses outside of the EU.
- Applications for repayment must be made by the 30 th June of the calendar year directly following the year for which the claim is being made. For example, a claim for the year ended 31 st December 2013 is required to be submitted on or before 30 th June 2014.
Submissions and details required for a reclaim for VAT under the EVR System
As outlined above, since 2010 all applications for a reclaim of VAT within the EU must be made under the EVR system and are to be submitted to the tax authority of your own State. The information required to complete the online application will include the following:
- Your name and full address
- An address for contact by electronic means
- A description of your business activity for which the goods and services are acquired
- The refund period covered by the application
- Bank account details, including IBAN and BIC codes
- Details of each invoice or importation document to include:
- Name and full address of supplier
- The VAT identification number or tax reference number of the supplier
- The prefix of the Member State of Refund (e.g. Ireland’s prefix is IE)
- Date and number of the invoice or importation document
- Taxable amount and amount of VAT expressed in the currency of the Member State of Refund
- The amount of deductible VAT calculated expressed in the currency of the Member State of Refund.
- Nature of the goods and services acquired
If you are an Irish company submitting a reclaim of VAT to the Irish Revenue Commissioners the Revenue Online System (ROS) has a facility whereby you can prepare your claim offline and upload the completed application through the bulk upload facility.
It must be noted that while a refund is based on a calendar year, refunds can be claimed throughout the year, with a maximum of 5 claims allowable within a calendar year. If you are making a claim for a period of between 3 months and 1 calendar year the total amount of VAT claimed must not be less than €400, with a minimum VAT reclaim of €50 allowable for a period of a calendar year (12 months).
Growing Global Markets
As mentioned at the outset the global market is expanding at a significant rate. As Europe is the largest economy in the world it is an important economic and political player. EU Directives such as the one outlined above are developed to assist with the free trade between countries, however the application process will have a number of conditions and restrictions so it is advisable to seek assistance from your advisor if making such a claim.
If you trade with other countries within the EU and would like assistance in completing a EVR or a Form VAT 60OEC please do not hesitate to contact a member of our team.