VAT / EU VAT / Intrastat

[julm]

Hi!

I'm feeling a bit confused since I've made the switch from Quickbooks 2006 (Regular) to Quickbooks 2008 (Professional) ... One of the most important reasons for the switch was that a friend had told me that reporting and filing VAT for Irish businesses was much easier.

Anyway, it looks to me like my VAT is all messed up, so I figured I need to add new VAT codes and VAT items to be able to get the proper reports. My VAT returns for January-June are due in a few days so I'm freakin' out a bit now.

What I'm stuck with at the moment is this:

I trade with UK and German companies. I purchase goods from one and purchase services from another. (I only ever sold services to another VAT-registered EU country once, so that's not too important at the moment.) So, both companies I purchase from do not charge me VAT because I've supplied them with my VAT number. Up until now I have put all of these under a VAT code "EZ" @ 0%. From what I can see I am supposed to be separating purchases for resale and purchases not for resale.

Quickbooks has given me the following default VAT items:

EC PFR Standard (EC Purchases for Resale PFR @ 21%)
EC PFR Zero-Rated (EC Purchases for Retail PFR @ 0%)
EC PNFR Standard (EC Purchases Not for Resale @ 21%)
EC PNFR Zero-Rated (EC Purchases Not for Resale @ 0%)

I presume I would use the zero-rated VAT item for my purchases? I can't seem to use the EC-Standard-VAT codes because Quickbooks tells me I need to consult my accountant about switching from cash-basis to accrual-basis accounting. Under what type of situation would one need to use the EC-Standard-VAT @ 21% ?

Your help would be greatly appreciated. By the way, I did look this up but could not really find any answers (not ones that I could easily understand anyway).

 

[Richard 101]

Hello Julm

Where did you get the 21% VAT from? Are you in Ireland? I tried these people on a similar VAT Quick Books question on European VAT and they were pretty good.
http://www.tmf-vat.com/european-vat
Richard

 

[julm]

Hi Richard,

Yes, I'm in Ireland. I know the standard VAT rate is now 21.5% but I guess since the software was released prior to Dec'08, it had the 21% as the default, which was the standard VAT rate up until Dec'08.

Thanks for the link. I'll check it out.

 

[Rudolf289]

Hello Julm

I am afraid I can not offer you much assistance with how Quickbooks works.

Here is some additional info that may assist you in filing your VAT return and VIES and Intrastat returns

To quote directly from the VAT Guide 2008;

The supply of goods by a VAT-registered trader in one EU Member State to a VAT-registered trader in another EU Member State normally qualifies as an intra-Community supply. A VAT-registered trader in the State may zero-rate the supply of goods to a customer in another EU Member State if:
• the customer is registered for VAT in that other EU Member State,
• the customer’s VAT registration number (including country prefix) is obtained and retained in the supplier’s records,
• this number, together with the supplier ’s VAT registration number, is quoted on the sales invoice,
• the goods are dispatched or transported to that other EU Member State.

I take it you are aware that a VAT-registered trader in the State making any zero-rated intra-Community supply of goods must submit the relevant periodic VIES statement to the VIMA office in Dundalk ?

INTRASTAT returns

Traders engaged in intra-Community trade are also obliged to make a periodic INTRASTAT return, for statistical purposes, where the value of goods acquired by them from other EU Member States exceeds Euro 191,000 per annum or the value of goods supplied by them to other EU Member States exceeds Euro 635,000 per annum.

Further information on the VIES and INTRASTAT returns is available from the VIMA Office, Government Offices, Millenium Centre, Dundalk, Co. Louth. – Phone number (042) 9353700 or LoCall 1890 251010, or by email to [email protected].

In relation to your VAT3 return you need observe the following ;

1) In box E1 you need to record the value of sales to other EU countries
2) In box E2 you need to record the value of Goods received from other EU
countries
3) In box T1 you need to record the total VAT liability of goods and services
supplied plus intra EU acquisitions and parcels imported VAT free
4) In box T2 you need to record the total deductible VAT in respect of your
purchases and Intra EU acquisitions and VAT paid on imports from outside
the EU

Another quote from the VAT Guide

10.5 Right to deduct VAT - general rule
In computing the amount of VAT payable in respect of a taxable period, an accountable person may deduct the VAT charged on most goods and services which are used for the purposes of his or her taxable business. No deduction may be made for the VAT on goods and services used for any other purpose, such as VAT exempt activities, (but see paragraph 10.10 below). To be entitled to the deduction the trader must have a proper VAT invoice or relevant Customs receipt as appropriate. Persons required to register for VAT in respect of intra- Community acquisitions only are not entitled to a deduction in respect of that VAT.
While a deduction of VAT is allowable only on purchases which are for the purposes of a taxable business, a situation may arise where a portion of a trader’s purchases may be for the purposes of the taxable business and the remaining portion for the trader’s private use, for example, electricity, telephone charges, heating expenses etc. where the business is carried on from the trader’s private residence. It may also arise that inputs may be used for both taxable and non-taxable activities. In such cases, only
the amount of VAT which is appropriate to the taxable business is deductible.

That would suggest that most if not all of your purchases are deductible from a VAT point of view. However, I would recommend to have a word with your accountant to make sure.

Best of luck
Rudolf289

 

[julm]

Hi Rudolf289,

Thanks for all the info!

I take it you are aware that a VAT-registered trader in the State making any zero-rated intra-Community supply of goods must submit the relevant periodic VIES statement to the VIMA office in Dundalk ?

No, I wasn't aware of that. Good to know. The only thing I have been filing apart from VAT3 (and obviously income returns) is RTD.

In relation to your VAT3 return you need observe the following ;

1) In box E1 you need to record the value of sales to other EU countries
2) In box E2 you need to record the value of Goods received from other EU
countries
3) In box T1 you need to record the total VAT liability of goods and services supplied plus intra EU acquisitions and parcels imported VAT free
4) In box T2 you need to record the total deductible VAT in respect of your purchases and Intra EU acquisitions and VAT paid on imports from outside the EU

I'm clear on E1 and E2, but not sure about T1 and T2. The way I understand it is that with regards to goods and services I purchase from other member states, I only have to record the total value ex. VAT - since the deductible VAT cancels out the liable VAT I don't have to pay any VAT (nor deduct since it was supplied zero-rated) for EU acquistions, or am I wrong?

For the sake of simplicity, let's just say I don't supply any zero-rated goods or services to other member states. I only have to record the total net value of EU acquisitions in box E2 and the total VAT amounts for good and services purchased or supplied at either 21.5% or 13.5% in boxes T1 and T2, right?

Maybe you could tell me about following? :

1. Imported goods and services from non-EU countries - e.g. digital, non-tangible goods like electronically delivered software, web hosting, domain names, etc. (up until now I've always assumed a 0% tax rate, but am not sure)

2. Goods and services purchased from other EU member states on which I was charged VAT at that country's tax rates - e.g. Luxembourg, 15%

I'm planning to consult an accountant this week. I just hope she can see me on short notice.

 

[julm]

I also forgot to mention (you may or may not know), I also supply non-tangible goods and services to foreign countries like India, U.S. etc. and wondered if I have to account for those sales too (in terms of VAT).

 

[Rudolf289]

Hello Julm,

I do recommend indeed that you speak to an accountant to obtain proper advise. I am involved in imports / exports (my business is logistics and freight forwarding) and as a result I am reasonably familiar with this subject.

In relation to Box T1 and T2, opinion is divided as to what to do. The VAT liability you incur on your Intra European Acquisition (T1) is also a deductible input (T2). The net result is zero as you are claiming a deductible in the same amount as the liability. Therefore some people (including some accountants) suggest you don't have to account for these. I think you should, as it is specifically requested.

In relation to the services that are supplied to you from outside the EU, I am not sure how these should be treated. I would suggest you ask your accountant to check the following paragraphs in the Irish VAT Guide ;
2.6 Fourth Schedule services
4.8 Fourth Schedule (or ‘received’) services
4.9 Electronically supplied services
4.10 Fourth Schedule services – summary table

I am not sure how to interpret these to the extend that I can tell you if you are liable for VAT on these supplies or not. I guess you are, but please don't ask me to tell you why .......

In relation to VAT paid on supplies from other EU member states, I would suggest to have a look at the link that Richard101 provided as they do a VAT recovery service.

Hope this helps.

Regards,
Rudolf289

 

[Rudolf289]

I also forgot to mention (you may or may not know), I also supply non-tangible goods and services to foreign countries like India, U.S. etc. and wondered if I have to account for those sales too (in terms of VAT).

In relation to these, you do not have to account for these. All exports to countries outside the EU are zero rated.

Regards,
Rudolf289

 

[julm]

Thanks for all the information. It's much appreciated.

I spoke with my accountant today, and to be honest, I'm not that much wiser.

I think the questions I had might have been a little too complex. She was of the opinion that I was over-complicating things.

She wasn't too familiar with Fourth Schedule Services but said she'd look into it.

I also asked her about EU VAT - tracking acquistions with a VAT rate of 21.5% entering it as a liability and as a deductible rather than using a 0% rate. Again, she said adding and deducting it was over-complicating things. However, I also spoke to a friend of mine who's also an accountant and he was of the opinion I should use a VAT group for EU acquisitions - with 2 VAT items, one with a rate of 21.5% and the other with a rate of -21.5%.

I am going to send him a copy of my company file and hopefully he'll be able to clarify a few things for me on Saturday.

As for 4th Schedule Services, etc. I think I might have to study the VAT guide a bit myself. Not looking forward to that

You might know this: in the 4th Sch. Services summary table there's the following:

Supplier Customer Cust. Type Place of Supply Person liable to pay VAT
Outside EU Ireland Business Ireland Customer

In the column "Person liable to pay VAT" - does "Customer" relate to me (the original supplier's customer) or my customer (the person I'm reselling to if the purchase was for resale)?

The accountant said "Customer" would be my customer, but the way I picked it up was that with 4th Sch. Services, the "place of supply" is deemed to be in Ireland (because the goods were electronically delivered), and therefore the "customer" would be me, and I would be liable to pay the Irish equivalent VAT rate, although I can also put it down as a deductible.

 

[Rudolf289]

Hi Julm,

this is where it get's rather complicated. And as I predicted, on EU acquisitions and supplies the opinions vary as to whether to include them in your return and claim the deductible to offset them, or not. I am going on the basis as to what the notes on the VAT3 return say, and they clearly ask you to include your intra European Acquisitions and Supplies.

I therefore would tend to go with your friend's opinion.

I must admit, being just a freight forwarder, I am not well up on the Fourth Schedule ......

When it comes to VAT surrounding transportation (e.g. to/from EU member states or to/from outside the EU) I am more confident about my ground ......

Hope you will get sorted

Regards,
Rudolf289

 

[julm]

I just spent the night working on VAT returns : ( and wanted to update the thread.

I read through the Fourth Schedule supplement again and spent hours updating my VAT items, VAT groups and VAT codes in Quickbooks (If the government decide to change the VAT rate AGAIN, I'll probably go insane). Anyway, I'm fairly sure that the supply of services to non-EU business customers is zero-rated (not exempt), pretty much the same as supply to EU business customers, and the supply of services from non-EU countries to business customers in Ireland is subject to Irish VAT rates - the Irish business customer has to account for VAT the same way as intra-EU acquistions, except that when filing the returns, you would treat it as a domestic purchase rather than an EU purchase. According to the new amendments to the VAT Act:

For VAT purposes, the recipient of such services is regarded as the supplier of the services to himself or herself. The recipient of services from outside the State must account for tax on such services in Box T1 and T2 (if appropriate) in their periodic VAT returns on the invoiced amounts at the appropriate Irish VAT rate as if they had themselves made the supply. They must furnish their Irish VAT number to the supplier.

revenue.ie/en/tax/vat/leaflets/place-of-supply-of-services.html

Now, I'd presume that you would add the VAT to the EUR value on your bank statements. I mean if you were to calculate the VAT based on the amount on the bill you receive from the supplier, it could get very messy if the bill is in a different currency - e.g. USD. But I'm not sure about that, I'll need to ask Revenue that I guess.

Although, now that I think of it, how would you do it if you placed an order with a UK supplier, who would issue you with an invoice in GBP? I've never had this issue because my own UK suppliers always issue me a Euro invoice.

 

[headache]

Hi Julm,
If your invoice is in a different currency, you would need to convert it to euro anyway to put it into your accounts. You would convert it on that days rate. When paying the invoice, if the rate is different, the profit/loss on the FX would be posted to a nominal for profit/loss on currency difference.
The whole postponed accounting is in my opinion a little daft but then some tax inspectors have said the same thing.
I take it that you did finally arrange to sort out your codes in Quickbooks. I use Sage Apex and for intra-Eu acquisitions, I have a code at 0% for purchase of EU goods. When I run the VAT report I manually add the postponed accounting. So eg, if T1 is €500 and T2 is €200, I will put my EU in E2 at say €200 and update the T1 to €621 and T2 to €321. I use the same method for Reverse VAT for subbies. Works for me!!