SUPPLY AND INSTALLATION OF GOODS VAT

Introduction

Section 8(1A)(f) VAT Act 1972, as amended was introduced with effect from 28 March 2003. The subsection provides for a charging mechanism for VAT payable on goods, which are installed or assembled in the State by a non-established supplier.

Under the previous legislation (Section 5(6)(c)(iv)) non-established suppliers who installed or assembled goods were obliged to register and account for VAT at 21% in the State. This new provision makes the business customer liable for the VAT due on a reverse charge basis and effectively treats these goods in the same way as any other goods received by a business customer from abroad. There is no extra VAT payable by the customer in these circumstances. Private consumers are not affected by the provision and non-established foreign contractors/suppliers of installed or assembled goods to a private person must continue to register and account as heretofore.

The Provision’s Parameters

Install is normally taken to mean the placing in position of equipment or machinery.

Assemble is taken to mean the fitting or the gathering together of parts of equipment or of a machine.

For the reverse charge to apply the contract must essentially be for the supply of goods being equipment or machinery which includes installation and or assembly as part of the supply. A typical example of such contract would be where a supplier of studio equipment has a contractual agreement to supply the equipment and also to install it, and where the installation charge is included in the price of the goods. Other examples of qualifying goods subject to the reverse charge might involve the installation or assembly of the following:

• Exhibition Stands
• Moveable Shop Counters
• Car Parking Equipment
• Computer Systems, e.g. time management systems
• Electrical Generators/Transformers.

Where a non-established foreign contractor/supplier supplies and installs goods under one composite supply contract, the supply is regarded as a supply of goods. However if a non-established foreign contractor supplies installation services in isolation or by way of a separate contract to the supply of goods, the supply of these installation services would be regarded as a supply of services in the Member State concerned. Similarly where the non-established foreign supplier supplies only the goods and has no involvement in the installation/assembly, the supply is regarded as an Intra-Community supply and acquisition in the Member States concerned.

Where a non-established foreign contractor/supplier whilst supplying and installing/assembling goods under one composite supply contract, incurs VAT in the course of his activities in Ireland, he is entitled to a deduction for any such VAT under the terms of the 8th or 13th Directives. Any queries for such claims should be directed to:

VAT Repayments (registered) Section
Government Offices
Kilrush Road
Ennis
Co. Clare

Telephone: 1890 202 033

E-mail: regvat@revenue.ie

Example

An Irish utilities company agrees to purchase a new generator from a German supplier for €1m. The contract stipulates that the goods are to be supplied and installed in Ireland and to be tested by the German company before being handed over to the Irish utilities company. The German company provides two technicians to install the goods over a number of weeks in Ireland and incurs some expenses in Ireland. On 10 June 2004 the German Company transfers the goods to Ireland. On 20 June the German Company pays an Irish supplier €10,000 plus VAT €2,100 for spare parts used in connection with the installation of the goods. On 30 June the German company gives a final bill to the Irish utilities company for €1,000,000 as agreed and is paid for the goods.

The transaction is taxed in Ireland by allowing the German non-established foreign contractor/supplier to charge the Irish utility company for the contract price without any additional VAT. The Irish utilities company reverse charges the VAT due of €210,000 (€1m @ 21%) in the appropriate VAT return. Deductibility is of course available to the Irish utility company as it is engaged in a fully taxable economic activity.

The German company can claim a refund of the VAT of €2,100 incurred in the course of its activities (in Ireland where it is making the supply) under the terms of the 8th Directive.

The provisions of Section 8(1A)(f) do not apply to the supply and installation of goods where the goods become fixtures. In such instances the supplier is obliged to register for VAT in Ireland and charge VAT at 13.5% subject to the two-thirds rule.