Pa Daly
Ceist:480. Deputy Pa Daly asked the Tánaiste and Minister for Finance to clearly outline the VAT obligations arising from reverse charge mechanisms; and if he will make a statement on the matter. [12345/26]
Amharc ar fhreagraTuesday, 17 February 2026
Ceisteanna (480)
Freagraí scríofa
I am advised by Revenue that the arrangements regarding accounting VAT are subject to the requirements of the EU VAT Directive, with which Irish VAT law is obliged to comply. Under VAT law, VAT is normally charged and accounted for by the supplier of the goods or services. However, in certain circumstances, it is the recipient rather than the supplier who is obliged to account to Revenue for the VAT due. This is known as the reverse charge mechanism (sometimes referred to as “self-accounting”) and applies to a range of supplies.
Generally, the reverse charge mechanism is an EU-wide way of facilitating cross-border trade between businesses whilst ensuring that VAT is properly accounted for in the Member State where the supply is received, and the mechanism is also used by Member States in relation to domestic supplies between businesses in a small number of specified sectors as a way of strengthening VAT compliance.
The reverse charge mechanism applies in relation to services supplied from abroad to taxable persons in the State (received services) and in relation to the intra-Community acquisition of goods (ICAs) from another Member State. It also applies to domestic supplies in the case of certain construction services, greenhouse gas allowances, scrap metal, wholesale supplies of gas or electricity, and gas or electricity certificates.
Where the reverse charge mechanism applies, the obligation to pay the VAT to Revenue arising from the supply of certain goods or services is shifted from the provider who is making the supply to the taxable person who is receiving the good or service. In a reverse charge situation, the provider does not charge VAT, and instead the recipient is obliged to account for the VAT in their VAT return on the invoiced amounts at the appropriate Irish VAT rate. As part of the arrangements, the recipient must provide their VAT number to the supplier.
There is no turnover threshold for businesses who receive taxable services for business purposes from outside the State (received services). Therefore, taxable persons, including VAT-exempt businesses, are obliged to register for VAT (if they are not already registered) and account for Irish VAT in accordance with the reverse charge mechanism. Non-taxable legal persons, including Local Authorities, State agencies and semi-State bodies, who do not have a VAT number are not required to register and account for VAT on received services.
Generally, the reverse charge mechanism applies to all ICAs by VAT registered businesses and are not subject to a separate threshold. However, in the case of businesses that are wholly exempt from VAT and other entities whose supplies are outside the scope of VAT they are required to register for VAT in respect of their ICAs of goods where the value exceeds or is likely to exceed €41,000 in any continuous period of 12 months. Examples of such businesses or entities includes, insurance companies, building societies, public authorities, hospitals and charities.
When the reverse charge mechanism applies the invoice issued by the supplier must contain the normal details required on a VAT invoice, other than the rate of tax chargeable and the amount of tax payable. The invoice should include a statement indicating that the recipient is liable to account for the VAT. Transactions subject to the reverse change should be included in VAT3, VIES, Intrastat returns and the Return of Trading Details as normal.
Detailed information is available on the Revenue website in relation to the VAT obligations arising from the reverse charge mechanism including specific guidance in relation to the application on the reverse charge to construction services and taxi drivers.
www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part11-immovable-goods/construction-services/construction-servcies.pdf.
www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Services/vat-treatment-of-taxi-drivers.pdf.