Quick answer
- Revenue lists a VAT registration threshold of €42,500 for persons supplying services only.
- Many contractors quote business clients VAT-exclusive rates, but the client-facing invoice total may include VAT after registration.
- VAT collected is not personal income; it is normally handled separately from your own day-rate target.
- If you work with consumers or VAT-sensitive clients, the VAT-inclusive price may matter more than the VAT-exclusive rate.
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VAT-exclusive versus VAT-inclusive quoting
| Quote type | What the client sees | Risk |
|---|---|---|
| VAT-exclusive | Day rate before VAT | Invoice total increases when VAT is added |
| VAT-inclusive | Total price including VAT | Your net revenue may be lower if VAT is not planned |
| No VAT registration | No VAT charged on invoice | May change if turnover crosses a threshold |
Where VAT fits into contractor pricing
VAT should be kept separate from your personal income target. Your day rate needs to cover business costs and tax set-aside. VAT registration then affects how invoices are presented and how VAT is handled, not simply how much you personally earn.
The €42,500 services threshold
For an Irish-established contractor supplying taxable services only, Revenue lists a principal VAT registration threshold of €42,500. Its current guidance measures annual turnover excluding VAT over a calendar year, rather than a rolling period. Monitor supplies during the year and check registration requirements before waiting for year-end accounts. Goods, exempt activities, overseas customers and services acquired from abroad can change the treatment or create separate registration obligations. A qualifying business below the threshold may elect to register. See Revenue’s turnover definition and thresholds and who should register for VAT.
The threshold is based on turnover, not profit or the amount left after expenses. For a services-only contractor whose supplies count towards the threshold, 107 days billed at €400 within the same calendar year produce €42,800 excluding VAT. This exceeds the €42,500 headline threshold; business expenses do not reduce that turnover figure. Check the registration treatment and effective date with Revenue or your adviser before issuing affected invoices.
Worked quote at the 23% standard rate
| Quote wording | Net day rate | VAT | Client total |
|---|---|---|---|
| €500 plus VAT | €500.00 | €115.00 | €615.00 |
| €500 including VAT | €406.50 | €93.50 | €500.00 |
If the commercial agreement says only “€500 per day” and does not state the VAT treatment, the parties can have different expectations. Put “plus VAT if applicable” or the exact VAT-inclusive total in the written quote and contract.
After VAT registration
- Use the correct VAT number, rate, tax point and invoice fields.
- Keep output VAT separate from operating cash.
- Retain valid purchase invoices for any input VAT claimed.
- File VAT returns and payments for the assigned taxable periods.
- Review cross-border, reverse-charge and place-of-supply rules before invoicing overseas clients.
- Reconcile the VAT control balance to the return and bank payments.
Frequently asked questions
Do contractors need to register for VAT in Ireland?
It depends on taxable turnover and the type of supply. Revenue lists €42,500 for services-only suppliers, but exact treatment should be checked.
Is VAT part of my contractor income?
VAT collected from clients should not be treated as personal income. It is normally accounted for separately.
Should I quote VAT-inclusive or VAT-exclusive?
For business clients, VAT-exclusive quoting is common, but the safest approach is to make the quote wording very clear.
Is the €42,500 threshold based on profit?
No. The principal services threshold is based on turnover, not taxable profit after expenses.
Can a contractor register voluntarily?
Revenue permits election to register in some below-threshold cases. Consider client type, input VAT, admin and cash flow before deciding.
What is €500 plus 23% VAT?
At the 23% standard rate, €500 plus VAT is €615: €500 net and €115 VAT.
What is the net amount inside €500 including VAT?
At 23%, divide €500 by 1.23. The net amount is €406.50 and the VAT is €93.50, subject to normal rounding.
Do overseas clients change the VAT answer?
They can. Customer status, location, service type and place-of-supply rules can change what appears on the invoice. Check before assuming Irish VAT applies.
Sources & references
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