Quick answer
- Reverse charge moves the VAT-accounting responsibility from the supplier to the customer for specified transactions.
- An Irish business receiving certain services from abroad may need to register and self-account even below the normal domestic turnover thresholds.
- The supplier normally does not charge Irish VAT where the reverse charge correctly applies; the invoice needs the appropriate wording and VAT details.
- The Irish customer generally includes the self-accounted VAT in T1 and may claim it in T2 only to the extent recovery is allowed.
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What is reverse-charge VAT?
Under the normal VAT system, the supplier charges VAT and pays it to Revenue. Under reverse charge, the customer calculates and reports the VAT instead. This is also called self-accounting.
Reverse charge is not a discount and does not mean the transaction is VAT-free. It changes who accounts for VAT. Common Irish questions involve services received from suppliers abroad, intra-EU acquisitions, relevant construction services and other specifically listed transactions.
Services received from abroad
An Irish business receiving a service from a supplier outside Ireland may be the place where the service is taxable under the business-to-business place-of-supply rule. The Irish recipient then self-accounts at the Irish rate that would apply to that service.
Reverse-charge invoice and VAT3 example
An Irish VAT-registered business receives a €5,000 service from an overseas supplier. If the equivalent Irish service is standard-rated at 23%, the self-accounted VAT is €1,150.
| Record | Illustrative amount | Treatment |
|---|---|---|
| Supplier invoice | €5,000 | No Irish VAT charged where reverse charge applies; appropriate reverse-charge wording and VAT details. |
| T1 | €1,150 | Output VAT self-accounted by the Irish customer. |
| T2 | Up to €1,150 | Deductible only to the extent the customer has VAT-recovery entitlement. |
If full recovery is allowed, the T1 and T2 entries may offset. If the customer has exempt or mixed activities, some or all of the T2 deduction may be restricted.
Common reverse-charge mistakes
- Assuming every foreign invoice is outside Irish VAT.
- Applying reverse charge without confirming supplier, customer and place-of-supply facts.
- Forgetting that services received from abroad can trigger registration without a turnover threshold.
- Claiming the full T2 amount where VAT recovery is restricted.
- Leaving the invoice without the required VAT numbers or reverse-charge wording.
- Confusing reverse charge with zero-rated or exempt treatment.
Frequently asked questions
What does reverse charge VAT mean in Ireland?
It means the customer, rather than the supplier, accounts for VAT on a transaction covered by the reverse-charge rules.
Is there a VAT threshold for services received from abroad?
Revenue states that there is no registration threshold where a person is required to self-account for services received from abroad.
Does the supplier charge Irish VAT under reverse charge?
Normally not where reverse charge correctly applies. The invoice should contain the required VAT details and reverse-charge wording.
Where does reverse-charge VAT go on VAT3?
The customer generally records the self-accounted VAT in T1 and may claim it in T2 only to the extent VAT recovery is permitted.
Is reverse charge the same as 0% VAT?
No. Reverse charge changes who accounts for VAT; zero-rating is a taxable supply with a VAT rate of 0%.
Sources & references
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