Value Added Tax (VAT) is not sexy. In fact it is a complete and utter nightmare in general to revise, study and keep up to date with. In an effort to try to help my study efforts for my exams next week, the following is an aid for my and hopefully your amusement. It is a very obviously flippant example of how to use the legislation to determine the proper rate to charge for VAT using ‘sexy’ as the item about which we are determining if VAT applies!
This does not constitute tax advice in any form. If you have tax queries, please contact your local affiliated CTA-AITI Registered Tax Consultant via http://www.taxireland.com or review the relevant material of the Office of the Revenue Commissioners website.
So let’s begin with assuming that “sexy” is the item we are working with for VAT purposes.
1. Is ‘sexy’ within the scope of VAT?
For the purposes of this, we are assuming that ‘sexy’ is something which can be supplied for consideration per the definition outlined in s.3 VATCA2010 (because I am just being silly!).
s.3, VATCA 2010 provides that the ‘charge of value added tax’,
“except as expressly provided by this Act, a tax called value-added tax is, subject to and in accordance with this Act and regulations, chargeable, leviable, and payable on the following transactions:
a) the supply for consideration of goods by a taxable person acting in that capacity when the place of supply is the State;b) the importation of goods into the State;
c) the supply for consideration of services by a taxable person acting in that capacity when the place of supply is the State;
d) the intra-community acquisition for consideration by an accountable person of goods (other than new means of transport*) when the acquisition is made within the State;
e) the intra-Community acquisition for consideration of new means of transport when the acquisition is made within the State.
2. Service or Good?
So is ‘sexy’ a supply of a good or a service? It could be argued that ‘sexy’ is in fact both a supply of a good under s. 19(1)(a) ‘the transfer of ownership of the goods by agreement‘ and a service under s.25(1) ‘supply in relation to a service, means the performance or omission of any act or the toleration of any situation other than…“
In this instance, as “sexy” will be ‘performed’ again, it is more likely under the scope of being a ‘service’ rather than a ‘good’.
3. Place of Supply?
So after determining that ‘sexy’ constitutes a delivery of the s.25(1) service, determining the place of supply is the next step of the cards. This depends on where the good is being delivered and thus we look at the “General rules” under s.34, VATCA2010. As ‘sexy’ is not an “immovable good”, as per s.2 as it is not ‘land’. This rules out s.34(c) and s.33(2) and of course by a process of elimination means that ‘sexy’ is a moveable service.
For the record, land as an “immovable good” is sexy; especially when it comes with planning permission, services and an acre of land. The stamp duty charging provisions under the SDCA99 element we will get over.
If it’s supplied to a ‘taxable person’ under s.34(a),the place of supply is:
(i) subject to sub paragraph(ii), the place where the persons business is established,
(ii) if the services are supplied to a fixed establishment of the person located in a place other than the place
where the business is established, the place where the fixed establishment is located,
(iii) if there is no such place of business or fixed establishment, the place where the permanent address or usual place of residence of the taxable person who receives the services is located;
So assuming that this service is being delivered to a taxable person, i.e. a person under s.2(1) ‘who independently carries on a business in the community or elsewhere’. (A non-taxable person is somebody not in business as per s.2(1).)
Thus the place of supply will be deemed to be the State under s.34(a) assuming the service is performed in the state. In addition the Use and enjoyment provisions under s.35(1) would make sure that even if the ‘sexy’ service was hired from outside the state, if it was enjoyed within the State, it would be within the scope of the legislation and Irish VAT would apply.
4. Is it listed under Schedules 1, 2, or 3? I.e is it exempt, 0% or reduced?
So ‘sexy’ is 1) within the scope for Irish VAT as it is for consideration; 2) a service; and 3) delivered within the state. So what rate of Irish VAT is chargeable?
Well I’m pretty sure it is not an exempted service under Schedule 1 but could it be a Schedule 2 zero rated service, meaning that the s.59 deductions could be claimed on any expenses on the provisions of providing the ‘sexy’ service? As you may have guessed that ‘sexy’ does not feature under any of the headings under this Schedule. For your information however you can find out the exact technical consistency of bread under Part F, Table 2.
Thus we are slowly moving into the realm of Schedule 3 and the reduced rate. I am quite certain that it does not come under the provision of s.4(2) “Live Poultry or live Ostriches”. (Suddenly all those Ostrich farms that were popular several years back make a lot more sense now.)
A further cursory glance at this schedule and you discover that ‘sexy’ does not come under s.13(1) ‘Other Services’ or s.21 Miscellaneous Services. Another blow, which means there is only one option remaining…
5. The Standard Rate
The standard rate of VAT as laid out under s.46 which of course determines as follows:
s.46(1) Tax shall be charged, in relating to the supply of taxable goods or services, the intra-community acquisition of goods and the importation of goods at the whichever the following rates is appropriate in any particular case:
A) 21** per cent of the amount on which tax is chargeable other than in relation to goods or services on which the tax is chargeable at any of the rates specified in paragraphs (b), (c) and )d).
So drawing to this to a conclusion because I need to actually go and tackle Personal Taxes next, we have learned the following…
VAT is not sexy but if ‘sexy’ was sold for consideration:
1. It would fall under the scope of VAT;
2. It could be a good or a service;
3. It is not listed under Schedule 1, 2, or 3;
4. It would be chargeable under s. 46(1) at the standard rate of VAT.
As above this is not tax advice. It is a very obvious flippant example of how to use the legislation to determine the appropriate rate to charge for VAT. If you are selling ‘sexy’ for consideration make sure it does not fall foul of other tax legislation, not to mention any potential criminal legislation. Remember even illegal activity can be taxed under the Taxes Consolidated Acts 1997.
* random note: “new means of transport” is actually defined in s.2, VATCA 2010 as below….In a nutshell, that bargain “almost new” top of the range car may technically be classed as new under the legislation if
“new means of transport” means motorised land vehicles with an engine cylinder capacity exceeding 48 cubic centimetres or a power exceeding 7.2 kilowatts, vessels exceeding 7.5 metres in length and aircraft with a take off weight exceeding 1,550 kilo-grammes—
a) which are intended for the transport of persons or goods, and
b) (i) which in the case of vessels and aircraft supplied 3 months or less after the date of first entry into service and in the case of land vehicles were supplied 6 months or less after the date of first entry into service, or
(ii) which have travelled 6,000 kilometres or less in the case of land vehicles, sailed for 100 hours or less in the case of vessels or flown for 40 hours or less in the case of aircraft,
Other than vessels and aircraft of the kind referred to in paragraph 4(2) of Schedule 2″
** For exam purposes, I work with Finance Act 2011. The present standard rate of VAT was increased from 1st January 2012 to 23% under Budget 2012.