VAT news for 2024

VAT changes announced in the Autumn Budget to be enacted into law by the Finance Act.

Following a one-year extension, the reduced VAT rate on electricity and gas to be maintained at 9% until 31 October 2024.

In response to the emergency accommodation crisis, Revenue will consider lettings of hotel or guest house rooms for emergency accommodation to be exempt from VAT   

Further changes effective from 1 January 2024 include:

  • Increases in the thresholds for VAT registration
  • Reduction in the flat rate farmer addition percentage
  • Zero rate of VAT to apply to the supply and installation of solar panels for schools, as well as the supply of e-books and audiobooks

Retail stores are gearing up for the implementation of a Deposit Refund Scheme for bottles, cans, and other containers involving a deposit paid. This scheme is scheduled to be enacted early in the New Year.

Coupled with the existing changes to the VAT system, more substantial developments might be on the horizon, impacting how businesses report VAT in Ireland.

Central Electronic System of Payment (CESOP)

CESOP – the EU-wide VAT transactional reporting obligation for payments is effective from 1 January 2024, with the first reporting quarter by the 30 of April 2024.

Background

CESOP has been created by the European Commission to support efforts to close the VAT gap in the EU. The VAT gap is the VAT revenue that Member States in the EU are missing as a result of errors and fraud. By collecting data on cross-border payments, the EU expects to collect VAT that was previously unpaid.

EU Member State tax authorities are, in turn, responsible for performing some quality checks on the data and forwarding it to the central database at the EU level: CESOP.

The stated objective of this new measure is to give tax authorities of the Member States the right instruments to detect possible e-commerce VAT fraud carried out by sellers established in another Member State or in a non-EU country.

The measure respects and incorporates data protection rules.

Only information related to payments that are likely to be connected to an economic activity is required to be transmitted to the tax authorities. Information on consumers and on the reason underlying the payment is not part of the reporting transmission as captured.

Who is affected?

All European Union (EU) Payment Service Providers (PSPs) will be required to record and report transactional data of cross-border payments. 

PSPs will submit data on cross-border payments received by businesses from customers. PSPs will submit this data to the tax administrations in each EU Member State in which they provide services.

The reporting obligation applies to “payment service providers” as defined in the Payment Services Directive (Directive (EU) 2015/2366 of the European Parliament and of the Council, “PSD2”). This encompasses credit, electronic money, post office giro and payment institutions, including those benefiting from the small payment institutions exemption (SPIs).

In practice, banks, card schemes, merchant acquirers and CPSPs (Collecting Payment Service Providers) will likely be affected the most, as well as retailers and marketplaces that have their own “inhouse” payment service provider governed by PSD2.

Reporting obligations

It is, at its core, an administrative obligation on payment service providers in the EU (EU PSPs).

These EU PSPs will be required to keep records of cross-border payments and report these transactional data on a quarterly basis.

All cross-border payments where the payer is in the EU are affected.

Any EU PSP processing a cross-border transaction needs to keep and report certain payment data.

Public consultation process on the modernisation of Ireland’s VAT invoicing and reporting system

With the launch of the Revenue Commissioner’s public consultation process on the modernisation of Ireland’s VAT invoicing and reporting system, Mazars has contributed some initial feedback and views on the topic through representative bodies.

In principle, the proposal to introduce real-time digital reporting and electronic invoicing aligns with global and EU adoption trends. However, the potential implementation of such a transition would entail costs associated with the development and adaptation of reporting and invoicing systems to meet digital requirements.

While achieving consensus at an EU-wide level remains uncertain, such a project needs to be approached in a logical and transparent manner with the incentivised involvement and timely engagement of all key stakeholders.

Both domestic and international businesses must be given ample notice and time for engagement and the implementation of upgraded reporting systems.

In the context of project rollout, there is a need to adopt a transition/testing period to allow refinement on both sides – Revenue and businesses – within the reporting framework.

Although meaningful legislative changes resulting from the ongoing public consultation process in Ireland and across the EU are unlikely for several years, proactive planning and preparation for future implementation are crucial in the short term.

The deadline for public feedback has been set by the Revenue Commissioners on Friday, 12 January 2024.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars VAT team below:

Staff Member

Position

Email

Telephone

Frank Greene

Tax Partner

fgreene@mazars.ie

01 449 6415

Alan McManus

Tax Director

amcmanus@mazars.ie

01 512 5525

December 2023