A trader in Ireland purchases goods in January 2016 costing €5,000 from a company in Germany. The goods were purchased for the purposes of their taxable supplies. The German company does not charge VAT on the intra-Community supply to Ireland as the conditions for the zero rate in Germany have been met.
The Irish trader must charge themselves VAT at the rate applicable in Ireland, for example VAT of €1,150 (5,000 at 23%) at the standard rate. However, the Irish trader can claim an input credit of €1,150 as the goods were purchased for their taxable supplies, assuming the purchase is deductible for VAT purposes.
Two taxable events have occurred:
1) the intra-Community supply at the zero rate for which the supplier in Germany is responsible
2) the intra-Community acquisition at the appropriate rate in Ireland for which the purchaser is responsible.
Irish trader’s VAT 3 return January/February 2016
|Type of VAT liability
|T1 (VAT on sales)
|T2 (VAT on purchases)
|T3 (VAT payable)
|T4 (VAT repayable)
|E1 (value of goods sent to other EU countries)
|E2 (value of goods received from other EU countries)
When the Irish trader sells the goods on, VAT is chargeable to their customers at 23% and paid over to Revenue in the relevant VAT returns in the normal course.