Revenue Note for Guidance

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Revenue Note for Guidance

PART 3 – TAXABLE TRANSACTIONS

Overview

This Part, which contains 3 Chapters, sets out the rules relating to taxable transactions for VAT purposes. A transaction has to be taxable in order for VAT to apply.

Chapter 1 deals with the supply of goods. It covers definitions of the supply of goods, transfers and disposals that are considered not to be supplies of goods, rules for supplies where there is no consideration as well as a number of special cases, including the concept of a self-supply (sections 19 to 23).

Chapter 2 covers the meaning of intra-Community acquisition of goods (section 24). In the EU Single Market, VAT is accounted for on sales of goods between traders in different Member States by a system of intra-Community supplies and acquisitions of goods. The supplies are zero-rated in the Member State of origin and the tax is accounted for by the VAT-registered accountable person in the Member State of destination.

Chapter 3 deals with the supply of services. It includes definitions of the supply of services, self-supplies of services, transfers deemed not to be supplies of services and other special rules (sections 25 to 28).

Chapter 1 - Supply of goods

19. Meaning of supply of goods

Summary

This section defines the meaning of supply of goods. Generally speaking, a taxable supply for VAT purposes means the normal transfer of ownership of goods from one person to another. This includes supplies that are liable at the zero rate of VAT.

Details

(1) Subsection (1) defines a supply of goods for VAT purposes as follows:

  • (1)(a) The transfer of ownership of goods by agreement, including where the transfer of ownership is to a finance company of goods which are to be handed over to a person under a hire-purchase or credit-sale arrangement.
  • (1)(b) The sale of movable goods on a commission basis by an auctioneer or agent.
  • (1)(c) The actual handing over of goods to a person under a hire-purchase agreement, even though ownership of the goods will not transfer to the purchaser until the terms of the contract have been fulfilled. Where the hire purchase agreement is financed by a finance company then the supply is made by the finance company. (Note that, in accordance with section 20(1), the legal transfer of ownership of the goods is not a supply of goods for VAT purposes.)
  • (1)(e) The transfer of ownership where the goods are acquired compulsorily by the State or by a local authority or are seized from a person by a sheriff or other person acting under statutory authority. This treatment achieves the same result as if the person sold the goods in question and paid the sheriff out of the proceeds.
  • (1)(f) The diversion of movable goods from a taxable business purpose to a non-taxable or exempt business purpose, commonly referred to as a self-supply.
  • (1)(g) The diversion of goods, apart from immovable property under subsection (1A), from a taxable business use to a non-business (private) use or their disposal free of charge by the trader. This is also commonly referred to as a self-supply. This provision ensures that goods acquired VAT-free as part of the purchase of a business (under the transfer of business rules) do not escape the self-supply charge if they are subsequently diverted to private use, or given away free of charge (for example, distributed as gifts).
    Example: A self-supply occurs when an accountable person diverts goods for which he/she is entitled to a VAT deduction to an exempt (subsection (1)(f)) or a private (subsection (1)(g)) use. The taxable amount for such a supply is provided for in section 42 and is the cost. Suppose a trader takes a computer from stock-in-trade for personal use:
    • Cost of computer, VAT inclusive = €1,230
    • VAT element at 23% = €230
    • Trader accounts for the self-supply by increasing his/her ‘VAT on sales” figure by €230 in the VAT return for the period in which the self-supply occurred.

In this case, the supplier becomes the final customer and must suffer the VAT on the supply, in the same way as other final customers. Businesses do this by accounting for VAT on the cost to themselves of the goods (excluding the VAT).

  • (1h) The transfer of goods from a business in the State to that business in another Member State or the transfer of a new means of transport by a person in the State to the territory of another Member State. These goods will then be an intra-Community acquisition on arrival in the other Member State and liable to tax there. However, if the goods are transferred for the following purposes the transfer is not a supply in the State:
    • (1)(h)(i) Goods that are installed or assembled in the other Member State by or on behalf of the supplier. Goods sold on board vessels, aircraft or trains on intra-Community routes. Goods taxable in another Member State under distance sales rules.
    • (1)(h)(ii) Goods transferred in circumstances outlined in Schedule 2, covering intra-Community supply or export from another Member State; supply, modification, repair, maintenance, fuelling and provisioning, and hiring of certain sea-going vessels or aircraft (and their equipment) operating chiefly on international routes; gold transferred to the Central Bank.
    • (1)(h)(iii) –Goods transferred to another Member State for the purpose of having a service (including contract work) carried out on them or being assigned a valuation if the goods are returned to the transferor in the State after the service or valuation is carried out. Because these are not supplies for VAT purposes, they are not recorded on the VIES return – see Chapter 6 of Part 9. However, if the goods are not returned to Ireland after the service, the status of the transaction changes and the person in Ireland will be deemed to have made a taxable transfer (i.e. a supply to the Member State where the service is physically performed) of the goods in the condition in which they left Ireland.
    • (1)(h)(iv) The transfer of goods with a view to their temporary use in another Member State related to the supply of a service there by the person who sent the goods.
    • (1)(h)(v) The transfer of goods with a view to their temporary use for under 2 years in another Member State, where the temporary importation into that other Member State of the same goods would be exempt from import duties. (An example would be goods temporarily brought in for an exhibition from outside the Community.)

(1A) The private use of immovable goods acquired or developed by an accountable person on or after 1 January 2011 is not a taxable supply.

(2) The transfer of ownership of immovable goods by way of very long leases is a supply of goods. This subsection confirms that the supply of goods for VAT purposes includes the transfer in substance of certain rights in respect of immovable goods. These supplies are defined in section 2(1) as transfers of the freehold equivalent interest.

(3) There is an anti-avoidance provision in subsection (3). This is intended to combat avoidance of tax, which might be attempted through a combination of traders (chain of sellers). It provides that each seller is deemed to have made a supply to the next person in the chain. Tax is payable by each person who becomes entitled to receive consideration, not just the person who actually supplied the goods.

Relevant Date: Finance Act 2019