Saturday, Dec 21, 2024

17:15

VAT RULES - SUPPLIES OF GOODS

Posted on: Thursday, July 02, 2015

In order for a transaction to come within the scope of VAT, a supply for VAT purposes must be seen to be taking place.

To answer an exam question properly you must establish whether it's a supply of a good or a supply of a service.

In this section we are only focusing on supplies of goods.

What do we mean by supplies of goods?

A supply of goods generally means the transfer of ownership of goods from one person to another.  It can, however, take many forms for VAT purposes.

A supply of goods takes place in the following circumstances:

1. The transfer of ownership by agreement. This includes sales and/or gifts of goods and covers movable and immovable goods.
2. The sale of movable goods through an undisclosed agent. 
3. The handing over of goods which are the subject of a hire-purchase agreement.
4. A compulsory purchase order.
5. The supply of electricity, gas and any form of power, heat, refrigeration and/or ventilation.
6. When goods are transferred from a person operating business in Ireland to an EU Member State for the purpose of their business
7. The transfer of a new means of transport by a person (whether or not in business) in the State to an EU Member State.
8. Intra-Community acquisitions of goods into Ireland by businesses.
9. The transfer of goods within a business from a taxable activity to an exempt activity. 
10. The appropriation of movable goods by a business person for private use.

So how do we tax these supplies of goods?

The place of supply rules are very important in determining if a particular supply of goods is within the charge to VAT

It is important to remember that a supply will only be liable to Irish VAT when the place of supply is Ireland.

Most supplies of goods are covered by the rule that the place of supply is where goods are located at the time of supply. 

While most supplies would be covered by this rule, there are exceptions which override the general rule as follows:


1. Goods involving dispatch or transportation
In the case of goods being transported across a border the place of supply is where the transport begins.


2. Goods involving installation or assembly
Where goods are assembled or installed by or on behalf of the supplier, the place of supply is where the goods are assembled or installed.


3. Supplies on board aircraft, vessels or trains travelling within the EU
In the case of goods supplied on board vessels, aircraft or trains during transport within the EU, the place of supply is where the transport began.


4. Distance sale of goods
This refers to sales made by a supplier in one Member State to unregistered persons for VAT purposes in another Member State and in situations where the supplier is responsible for the delivery of the goods to the customer.

Examples include: , telesales, internet sales etc.

Where goods (apart from new means of transport) are transported by, or on behalf of, the supplier:
(a) from the territory of one EU Member State, or
(b) from outside the European Union through the territory of another EU Member State into which the goods have been imported to a person who is not a VATable person in the State,

OR

from Ireland to a person in another EU Member State who is not registered for VAT,

then the place of supply is where the goods are when the transportation ends.


Final note with regard to Goods involving installation or assembly

The ‘reverse charge’ provisions relate to supply-and-install contracts for the sale of goods where:
■ the supplier is not established or VAT registered in Ireland; and
■ the Irish customer is either a taxable person, a statutory body or a local authority/Department of State.

Should this situation arise, the supplier is not required to charge Irish VAT and instead the customer
is required to “self-account” for Irish VAT in relation to the value of the contract.

If your exam questions includes a scenario where an Irish supplier sells goods to a customer in say France and part of the contract includes assembling or installing the goods he's supplied then you should advise him to seek advice as to the VAT requirements he may have in that Member State.