On what amount do you charge VAT?
Value-Added Tax (VAT) is charged on the total sum paid, or payable, to the person supplying the goods or services. The taxable amount includes all:
- taxes
- commissions
- costs
- and
- charges.
It does not include the VAT chargeable in respect of the transaction. This applies in cases such as the following:
- supplying goods or services
- receiving services from abroad
- and
- acquisitions of goods from other European Union (EU) Member States.
VAT on imports is charged on the Customs value of the goods.
Incidental charges
VAT is chargeable not only on the fee for the goods or services supplied. It also includes incidental charges incurred by the supplier which are passed on to the customer.
- Example
A consultant's fee for providing a consultancy service might include costs and expenses as follows:
Calculation of VAT chargeable
| Description | Amount |
|---|
| Professional fee |
€4,000 |
| Travel and subsistence allowance |
€2,000 |
| Hotel accommodation |
€700 |
| Postage and stationery |
€100 |
| Photocopying |
€50 |
| Total |
€6,850 |
| Amount on which VAT is chargeable |
€6.850 |
| VAT @ 23% |
€1,575.50 |
| Total chargeable to customer |
€8,425.50 |
What if the customer pays by credit card?
VAT is chargeable on the total amount actually charged to the customer by the supplier. Amounts withheld by the credit card companies from their settlements with the traders concerned form part of the taxable amount.
When payment is not made with money
Consideration for goods or services is made in a number of forms, examples of which include cash and payments in kind. Payments in kind can include:
- the exchange of goods or services as consideration
- and
- the release of an individual from an obligation.
VAT is chargeable on the open market, or arm’s length value of the goods or services received, as payment for supplies.
Deposit Return Scheme
The Deposit Return Scheme (DRS) provides for a deposit on drink products sold in plastic bottles or cans. The deposit is refundable when the container is returned to the supplier. The deposit is charged at each stage of the supply chain when the drink product is supplied. There is no VAT on the deposit when the drink product is supplied. Businesses in a supply chain supplying DRS products will not have to account for VAT on the deposit they charge.