VAT Snapshot Q3 2024

It’s been a busy Q3 2024 from an Irish indirect tax perspective with the bringing forward of the budget and consequently the Finance Bill from its traditional date.

As a result, this VAT Snapshot is jammed packed as we outline some of the more important indirect tax measures introduced, discuss the upcoming renewal deadline for the VAT 56 Authorisation and provide guidance on the procedures for non-UK businesses to reclaim UK VAT.

In addition, we wanted to address the Carbon Border Adjustment Mechanism (CBAM) and the transitional period for reporting embedded emissions in relevant CBAM goods imported into the EU which changes from Q3 2024.

1. Budget 2025 and Finance Bill – key Indirect tax headlines

In anticipation of the Government announcing a general election in the near future, we had an early Budget on October 1, 2024, which was quickly followed by the Finance Bill on the 10 October 2024. From an indirect tax perspective, the Government announced a number of changes, which we have detailed below.

Budget 2025 Indirect tax measures

• For the second consecutive year, an increase in the VAT registration thresholds was announced; These thresholds increase by €2,500 (to €42,500) in the case of services and by €5,000 (to €85,000) in the case of goods. This increase is to bring Ireland’s VAT registration thresholds in line with a package of EU-wide measures aimed at simplifying VAT compliance for SME’s which is due to take effect from 1 January 2025.
• The 9% reduced VAT rate for gas and electricity has been extended for an additional 6 months, providing relief until it reverts to 13.5% on 1 May 2025.
• The flat rate VAT compensation rate for unregistered farmers is to increase from the current 4.8% to 5.1% from 1 January 2025.
• A VAT rate reduction to 9% (from 23%) for the supply and installation of heat pumps is being introduced from 1 January 2025.
• Despite significant pressure and widespread lobbying, in advance of the budget, the Minister has opted not to reduce the VAT rate for the hospitality sector from 13.5% to 9%.
• Battery electric commercial vehicles will qualify for the €200 VRT rate, because of a change in the weight carriage ratio for such vehicles.
• The VRT rate of category B commercial vehicles with CO2 emissions of less than 120 grams per kilometre, will reduce by 5.3% to 8%.
• The carbon tax rate per tonne of CO2 emitted for petrol and diesel will increase from €56.00 to €63.50 from 9 October 2024. This increase will be applied to all other fuels with effect from 1 May 2025.
• The excise relief for independent small producers of cider and perry is being extended to also cover ‘other fermented beverages’, which will include products such as mead and wines other than grape wine such as elderberry wine, strawberry wine etc., as well as higher strength cider and perry.
• Excise increases on cigarettes (€1 per packet of 20 cigarettes), with pro rata increases for other tobacco products, effective from midnight 1 October, and notice that a new domestic excise on e-cigarettes is scheduled to be introduced mid-2025.

Finance Bill 2024 Indirect tax measures

In addition to the above, the following were also announced in the Finance Bill:

• From 1 January 2025 certain juice and drinkable products derived from plants, grains, seeds, or pulses shall be subject to the standard rate of VAT.  
• The Bill provides an amendment to affect the February 2024 announcement reducing the interest rate applicable to warehoused debts from 3% to 0%.
• The Bill provides amendments to clarify who has the right to deduct VAT on costs relating to goods /services supplied by an accountable person but under a power exercisable by another person (e.g. a receiver / liquidator). In addition, the Bill clarifies the restriction to recover VAT on specific non-deductible items such as food and beverages by insolvency practitioners.
• The Bill introduces fixed charge penalties for Payment Service Providers that are non-compliant with the CESOP information reporting requirements, which were introduced from 1 January 2024.
• The Bill provides clarity on the VAT exemption for management services provided to Alternative Investment Funds by EU Alternative Investment Fund Managers.
• The Bill provides details in relation to the excise charge on e-liquid products, which will be introduced next year. The tax will apply when an e-liquid is first supplied in Ireland, at a rate of €500 per litre (50c per ml of e-liquid)
• The Bill provides amendments that will widening the charge to Betting Duty in Ireland and introducing a new Remote Betting Duty.

Finally, it is worth quickly noting the following which were not in the Finance Bill but which we expect will be implemented into Irish VAT law, by way of separate statutory instrument, between now and 31 December 2025:

• From 1 January 2025, under the SME VAT Package, mentioned above, non-established traders can elect not to register for VAT in an EU Member State in which they are not established, if their turnover from supplies across the EU does not exceed €100,000 and they do not breach the relevant domestic VAT registration threshold in their own Member State. To avail of this new cross border threshold the SME must register to obtain a special VAT number (which will have an ‘EX’ prefix) and must report quarterly to their local tax authority, their sales in the other EU Member States, in which they are not VAT registered.
• In addition, from 1 January 2025, the VAT place of supply rules for livestreaming and virtual admissions to events and activities h will change across the EU. The new rules clarify that admission to an event where the “attendance is virtual” is no longer subject to VAT where the event takes place. Instead, the place of supply will be where the customer is established. As a result, from 1 January 2025 the normal place of supply rules will apply for B2B supplies. However, for B2C supplies, in the absence of the supplier registering for and charging VAT across multiple jurisdictions, the supplier can pay VAT to the multiple EU tax authorities via a one stop shop VAT registration. 

How EY can help

EY can provide assistance with navigating all aspects of the Budget and the Finance Bill both on a one to one basis and by clicking on the link eybudget.ie

Upcoming deadline for renewal of VAT 56 Authorisation – don’t delay!

Issue

Do you currently hold a VAT 56 Authorisation that is due for renewal by 31 October 2024?

Relevance

A business from which 75% or more of its turnover derives from intra-community supply or export of goods from Ireland may obtain a VAT56 Authorisation. Such, authorisation is very valuable from a cashflow perspective as it allows businesses the cash flow benefit of acquiring “qualifying goods and services” (effectively most goods and services) at the zero percent rate of VAT.

The application for this authorisation must be submitted to the applicants local Revenue office and is typically granted for a period of between one and three years. It is important to note that the certificate is not automatically renewed by Revenue and if it expires, VAT should be charged as normal by the supplier until the certification has been successfully renewed, which can cause a considerable amount of disruption for the business given the ERP system changes etc that would be required.

Last year, and again this year, we are experiencing an increase in the level of Revenue enquiries and scrutiny, particularly for those clients who are close to the 75% threshold or supplying a significant amount of services cross border. Therefore, it is important to submit the renewal, well in advance of the 31 October deadline, to ensure that the new authorisation is obtained on time.

How EY can help

EY can provide assistance with reviewing your application, completion of the application form, and liaising with your auditors and Revenue to make the renewal processes as smooth as possible.

2. Carbon Border Adjustment Mechanism (“CBAM”) – actual emissions data required for Q3 2024 reporting due 31st October.

Issue

relevant CBAM goods imported into the EU on a quarterly basis using the Transitional registry. By way of reminder CBAM applies if you supply cement, fertilizers, iron and steel, aluminium, electricity and hydrogen products.

To facilitate the initial roll out of CBAM, declarants were permitted to use default emission values given by the EU Commission for the first three quarterly reports (Q4 2023, Q1 2024 and Q2 2024).

For reporting from Q3 2024 onwards, the actual embedded emissions, not default values.

Relevance

For a variety of reasons, it can be extremely difficult to obtain actual embedded emissions data from suppliers based outside the EU. National authorities, including the Environmental Protection Agency in Ireland have stressed that actual emissions data is required for Q3 2024 reporting and highlighted its importance moving forward. National authorities are committed to following up with importers or indirect customs representatives which it suspects fail to comply with CBAM obligations, including incomplete or incorrect reporting.

How EY can help

Our customs and trade team are available to assess the impact of CBAM on your business by identifying impacted products and supply flows, providing support in obtaining actual emissions data from suppliers, availing of flexibilities and helping to calculate any potential CBAM costs.

3. Deadline of 31 December 2024 for UK VAT reclaims for non-UK businesses

Issue

Where your non-UK established business has incurred UK VAT during the period from 1 July 2023 to 30 June 2024 and wishes to claim this back, a VAT refund application must be submitted no later than 31 December 2024.

Relevance

Both EU and non-EU businesses that are not VAT registered or established in the UK, are required to submit their VAT refund claims for UK VAT incurred by them during the period from 1 July 2023 to 30 June 2024 by the deadline of 31 December 2024.

Additionally, for EU-established businesses, VAT incurred on goods in Northern Ireland may be subject to different rules. A key condition for these refunds is the principle of reciprocity; non-UK established businesses are eligible for UK VAT refunds only if their country of establishment offers similar VAT refund opportunities to UK-established businesses.

How EY can help

EY Ireland which includes our EY Belfast team can provide comprehensive support to clients in assessing the validity of their UK VAT refund claims, calculating the correct amount of VAT to be reclaimed, and facilitating communications with HMRC to ensure a smooth refund process.