Brexit Vat Overview: Imports - Irish Businesses Purchasing Goods from Abroad
by Kevin Canning
 
 

Part 3 of our Brexit Series will focus on Irish Businesses purchasing goods from Abroad. Brexit has made this far more complicated than in the past and therefore, we aim to provide an overview of the considerations here. There is some good news for seasoned imports with the new Postponed Accounting scheme creating a simplifying importing process.

 

An important point to note in relation to the supply of goods between Ireland and the UK is:  

  • NI is considered part of the EU for an initial period of 4 years
  • UK is not considered part of the EU. Therefore, all supply of goods between the EU & UK are now considered exports/imports

The following is a summary of the VAT & Customs:

 

We will use the example of clothing shop (ABC Clothes) to describe the VAT issues for the purchasing of goods from abroad. In this example, ABC Clothes purchases boxes of clothes from wholesalers (B2B – Wholesale) and then ABC also sells directly to Irish consumers through its shops (B2C). The B2C process has not changed and therefore, we will not focus on this here and instead focus on the importing of goods wholesale.

 

ABC’s products are subject to standard rate of VAT when sold in Ireland.

 

Business to Business (“B2B”) Supply of Goods

 

The following are the Irish VAT consequences when the goods are purchased from:

  • Irish Wholesaler: Irish VAT applicable, ABC claims are input VAT credit if fully VATable.

 

  • EU Wholesaler: ABC would provide the EU wholesaler with its EU VAT number and the purchase would be zero rated. ABC would then self account for VAT. This would be considered an intracommunity acquisition for ABC.

 

  • NI Wholesaler: As NI are still considered part of the EU for VAT on Goods, the same treatment would as an EU customer. The purchase would be considered intracommunity acquisition for ABC. However, customs might apply if you are using NI as a vehicle to transport goods to or from the UK (anti-avoidance measures).

 

  • UK Wholesaler: Given the UK is no longer part of the EU for the supply of goods, purchases from Mainland UK would now be considered an Import and not be included in ABCs VAT return. Purchases from the UK would now be considered the same as any other import such as from the US. Previously, ABC would have to pay import VAT at the point of entry and claim the VAT back in their VAT return causing a cashflow issue. However, Ireland has introduced a new “Postponed Accounting” system for all imports. This is discussed further below. Custom declarations and possible custom duties will apply to these transactions.

Old System for Importing:


For an Irish company importing from the US, import VAT was paid at the point of import. This VAT would then be reclaimed in the Irish company’s VAT return as input VAT if the product is sold as a VATable good. This created a cashflow issue for company’s importing goods.

 

New: Postponed Accounting:


Allows for importers to defer paying VAT at the time of import and instead self account for the VAT (reverse charge) when filing their VAT return. This is a major positive for cashflow and possibly the only good thing to come out of Brexit in terms of VAT.

 

Postponed accounting is available to all VAT registered importers. To qualify, companies have to be registered for VAT & obtain an EORI number and will be automatically be entitled to use it. 

 

Please note that the above is provided for informational purposes and should not be considered tax advice. if you would like to speak to Quintas about any Brexit issues, please contact either Kevin Canning (Kevin.canning@quintas.ie) or Dave O’Brien (Dave.obrien@quintas.ie)