VAT (Value-Added Tax) can feel like a complicated world when you’re first starting out. But here’s the thing: if you’re running a small or medium business in Ireland, understanding the basics of VAT isn’t just important — it’s essential for staying compliant and avoiding costly mistakes.
Let’s break it all down in simple terms so you know exactly what’s expected of you.
What Is VAT?
VAT is a tax charged on the sale of goods and services. If your business is VAT-registered, you collect VAT from your customers and pass it on to Revenue. You may also be able to reclaim VAT you’ve paid on business-related purchases.
In other words, you’re acting as a kind of middleman between your customers and the tax authorities!
When Does a Business Need to Register for VAT?
You must register for VAT if your annual turnover exceeds (or is likely to exceed) certain thresholds:
- €37,500 for services
- €75,000 for goods
If you’re close to the threshold, or if you expect to exceed it soon, it’s best to register sooner rather than later. Some businesses even voluntarily register below the thresholds — for example, if they have significant VAT costs they want to reclaim.
Important: Certain trades (like distance selling, intra-EU supplies, or imports) have different rules, so it’s worth getting advice if you’re unsure.
What Are the VAT Rates in Ireland?
Ireland has several different VAT rates, depending on what you’re selling:
- 23% — Standard rate (most goods and services)
- 13.5% — Reduced rate (building services, catering, hairdressing, etc.)
- 9% — Second reduced rate (tourism, hospitality, newspapers — subject to specific rules)
- 0% — Zero rate (exports, certain food products, books, children’s clothing)
Tip: Always double-check the correct VAT rate for your products or services — mistakes here can be costly.
VAT Returns and Deadlines
Once you’re registered, you’ll need to submit VAT returns — typically every two months. Each return will show:
- VAT collected from customers (sales)
- VAT paid to suppliers (purchases)
You then either pay Revenue the difference or claim a refund if your purchases exceed your sales.
Deadline: VAT returns (and any payments) are due on or before the 23rd day of the month following the end of the VAT period. For example, a January-February VAT return is due by 23rd March.
Late submissions can lead to penalties and interest charges — so diarising these dates is a smart move.
Common VAT Mistakes SMEs Make
Even the savviest business owners slip up now and then. Here are a few common VAT mistakes you’ll want to avoid:
- Missing registration deadlines when turnover crosses the threshold
- Applying the wrong VAT rate to goods or services
- Claiming VAT incorrectly on non-allowable expenses (e.g., client entertainment)
- Not keeping proper records (invoices, receipts, VAT calculations)
- Failing to adjust for exempt activities if you have mixed sales (some VATable, some exempt)
Remember: Revenue can audit your business at any time, so keeping your records clean and up-to-date is critical.
Final Thoughts: Get It Right from the Start
VAT doesn’t have to be a headache — but it does need your attention from the outset. Getting registered properly, understanding the right rates, and filing on time will keep your business on the right side of Revenue and help you avoid unnecessary stress later on.
