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bigduckontax, Accountant
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If i register a Luxembourg company that has a turnover of

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If i register a Luxembourg company that has a turnover of £1m GBP per year, manufacturing goods in Ireland and exporting to the UK, can i charge the Luxembourg rate of 17% VAT on all sales, or do i have to register and pay the Irish 23% vat as manufacturing takes place in ireland? Can i operate legally in Ireland, manufacturing goods and exporting to the UK, with a Luxembourg company which pays all of its vat in Luxembourg ?

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Guidance from the Irish state revenue indicates that Irish VAT should be levied on these sales and you will have to register there. Turnover threshold for Ireland is currently 75K Euros in any one year. If you are exporting to an UK company also registered for VAT and you have their registration number then you include this on your invoice and the Reverse Charge will apply. As you post the sales you credit VAT output tax, but simultaneously debit VAT input tax thus making the transaction effectively zero rated. You would then at intervals invoice from Luxembourg charging the Duchy's VAT rate to cover all transactions. You would be well advised to set up an Irish subsidiary company and register it for Irish VAT to service these transactions. It would provide a most convenient solution.

I do hope that I have shown you a relatively straightforward process in these matters.

Customer: replied 1 year ago.
HiThanks for your reply. So basically there would be no benefit of a Luxembourg company, we would have to register for vat and operate from Ireland due to fact we are manufacturing goods there? So if we sell to an individual who is not uk vat registered we charge vat, but if we sell to a uk company who has a vat number, we rate the vat at 0%?

Correct, the Irish Government guidance is quite clear that if it is manufactured in Ireland and sold then Irish VAT applies.

Not quite! If you sell to an individual in the UK who is not registered then you invoice and charge and account VAT in the normal way. If you sell to an UK organisation registered for UK VAT you still invoice including the Irish VAT and quote the UK VAT number also on the invoice. You achieve an effective zero rating through your book keeping of the reverse charge transaction. However as far as the buyer is concerned they have a VAT invoice upon which they can claim back input tax quarterly in the usual way.

I do hope I have clarified the situation for you. The semantics are a pain, but don't please do not blame me, I did not create the whole silly system.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 1 year ago.
HiOk thanks for your help its been very good.So to clarify we charge vat at the 23% rate regardless of the persons uk tax status. And then with our tax return at irish revenue we total up any sales to UK companies that are vat registered and then we do not have to pay the vat on that?For example we sell £100 worth of goods to a uk person not vat registered, we charge 23% VAT, so the persons pays £123, we pay £23 to the revenue.For example we sell £100 worth of goods to a uk company registered for cat, we charge 23% VAT, so the persons still pays £123, BUT we do not have to pay the revenue the £23?Does the UK vat registered person have to pay the vat or account for it in his UK vat booking keeping?Im sorry for the long wided nature, i am getting the full picture :)

Yes, because under the reverse charge system you will have inputs to offset the outputs.

Yes, the not registered transaction is processed as you surmise.

For the registered UK customer you have a reverse charge input tax to offset the output tax thus making the transaction effectively zero rated.

The UK customer will have to account for the tax in their book keeping. They will pay you for the VAT charged and will reclaim it as an input.

Simple, as the merkat in the TV advert would say!

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Hi, ok its very simple, NOT lol but i am getting the picture i just need to be sure financially.So the UK customer who is just a person not vat registered pays the 23% and sucks it up.The company who is vat registered pays the 23%, but claims it back on their own return, so basically minuses it off their vat return, so they get that 23% back.For us, say for example we sell 1m of goods in 1 year, £500k to retail customers in the UK not vat registered, and £500k to vat registered businesses, we would pay the irish revenue 23% of the 500k to retail customers, but would not be liable for the 500k to UK customers who are vat registered.So we would only have to pay the revenue 23% of the £500k not the whole £1m?Also any goods we buy from the UK, we give the company our vat number, and no vat is charged, so we get UK goods with no vat on them.Do we then have to pay the vat on these goods in ireland? For example we buy £100,000 of goods from the UK in to ireland, we pay no uk vat so no £200,000, do we then have to pay the 20% or 23% vat in ireland? So would we have to pay £20k or £23k to ireland revenue for importing the goods?

1.Yes, they are the end user.

2. yes you would, but you would recover the VAT by the reverse charge input tax item.

3. Correct.

4. Wrong, you would be invoiced gor the goods plus the VAT and pay the vendoe. You would recover the VAT as an input tax item in your accounts.

5. If you buy 100K of goods from the UK you will have to pay the UK vendor 20K of VAT. You will then reclaim this as an input VAT item. However, it is possible that on importation Ireland Customs might charge import duty (unlikely as it is another EU state) and Irish VAT. The former becomes a cost of sale, the latter can be reclaimed.

Thank you for your support.

Customer: replied 1 year ago.
Hi, can we go over some figures please just to make sure i am accounting correctly and that my vat figures for profit and loss are correct? i will add a bonus on for the extra advice...

VAT has no effect on the profit and loss account. They are merely debtors or creditors in book keeping terms an thus any outstanding balances at the end of an accounting period are merely a balance sheet item.

Let me have the figures and I will verify the tax treatment.

Customer: replied 1 year ago.
Say for example our net take on orders is £1,200,000 per year, which works out at £100,000 per month.In total we take £1,470,000 which includes £276,000 to account for the VAT which is £123,000 per month.Of this amount 50% is retail to uk customers who are not vat registered, the other 50% is to uk businesses who are vat registered. So we charge all customers 23% vat regardless. So we owe the revenue 50% of £276,000 which is £138,000.Our expenditures are as follows:UK Supplier £600,000 (inc 20% vat)So we would need to account for the goods and uk vat paid being £100,000 so instead of oweing the revenue £138,000 we owe them £38,000.Is this correct? Or am i missing something?
Customer: replied 1 year ago.
I understand VAT has no effect on the profit and loss account, but making sure that we have our figures correct means we can work out the correct profit and loss thanks

1. The customers who are not VAT registered are charged VAT which you have to pay to the Duchy. Those which are VAT registered you get relief from the output tax by the input tax under the reverse charge. The figure you quote as owing to the VATman is correct.

2. Correct, you would recover the 100K as input tax.

Customer: replied 1 year ago.
Ok great, thank you for clarifying.

Delighted to have been of assistance.

Thank you for your bonus.