VAT Guide for Freelancers in Ireland

VAT is an indirect consumption tax you need to pay the Irish government if you have clients or consumers in Ireland. The Irish government charges a standard VAT rate of 23%, and reduced rates of 13.5% and 9%, based on the category of goods and services you provide. You can find VAT-related information and updates for Ireland on the Revenue Commissioners website. Revenue Commissioners is the government tax authority responsible for administering and collecting taxes and VAT in Ireland.

If you are a freelancer in Ireland or looking to extend your freelancing services to Ireland, you should understand how Irish VAT works and this simplified guide will tell you everything you need to know - so, let’s get started!

What are the VAT rates in Ireland?

The Revenue Commissioners imposes three different VAT rates, and you should apply the rates applicable to the goods and services you provide

  • The Standard Rate of 23% - Any product or service not covered under the reduced or zero rates automatically needs to be charged the standard VAT rate of 23%.
  • The Reduced Rate of 13.5% - The VAT rate of 13.5% applies to fuel, electricity, construction, catering and restaurant services, entrance tickets to theatre and art galleries, cleaning services, vet fees, etc.
  • The Reduced Rate of 9% - The reduced rate of 9% applies to newspapers, electronic publications, sporting facilities, etc.
  • Zero Rate (0%) - Services exempt from VAT include exports, certain food products, books, disability aids, children’s clothes, shoes, etc. However, even for items exempt from VAT, you should maintain records and create a report based on your returns.

Additionally, the Revenue Commissioners also charge a rate of 4.8% on Livestock and a flat-rate 5.6% compensation for farmers.

When should you register for VAT?

If you provide tax-exempt services in Ireland to non-taxable clients, you don't need to register for VAT. However, if you are providing taxable services, you should be aware of the range of VAT registration thresholds. 

  1. If you supply services only in Ireland, you have to register for VAT once your annual turnover reaches or exceeds €37,500.
  2. If you provide distance sales of goods across multiple countries within the EU, you have to register for VAT once your turnover reaches or exceeds €10,000.
  3. If you acquire goods and services from other EU member countries, you have to register for VAT once your turnover reaches or exceeds €41,000.
  4. If you supply goods or more than 90% of your annual turnover is from the supply of goods, you have to register for VAT once your turnover reaches or exceeds €75,000. This 90% supply of goods does not include VAT exempt or zero-rated goods and supplies.

If you have paid some amount of VAT on the stock of items that you bought for resale, you may use this amount to reduce your annual turnover. If your reduced turnover no longer meets the threshold for VAT registration, you aren’t liable to register for VAT in Ireland.

However, even if you don’t meet the thresholds in any circumstances mentioned above, you can still voluntarily register for VAT. Additionally, you can check the Revenue Commissioners website for other potential scenarios that determine when you might need to register for VAT.

How to register for VAT in Ireland

As a solopreneur, you must have a Personal Public Service Number (PPSN) before registering for VAT in Ireland. Your Tax Reference Number (TRN) will be the same as your PPSN once you register for taxes. You can then register for VAT and manage your account through Revenue's eRegistration service, using Revenue Online Service (ROS)

Note that you must have a permanent residency in Ireland to be eligible for eRegistration. If you are not eligible for eRegistration, then you must complete Form TR1 to register for VAT. Additionally, paper applications for VAT registration will be returned to you or your tax agent. If you cannot access ROS, the Revenue office will only accept a hard copy of the TR1 form under exceptional circumstances.

If you are an ex-pat freelancer conducting economic activities in Ireland, you should submit the TR1 (FT) form by post to Business Taxes Registrations at the Office of the Revenue Commissioners.

Your VAT registration is active starting from when your local tax district sends you a note agreeing upon your VAT status. If any information in the application you submitted for VAT registration is incorrect or changed, you should notify the Revenue office within 30 days.

Another option is to register for VAT using Mini One-Stop Shop (MOSS), an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but beneficial if you have customers in multiple EU countries. MOSS allows you to avoid registering in each Member State of consumption. Even if you’re based outside the EU, you can register with MOSS in Ireland or other EU countries. To learn more, click here.

Alternatively, you can hire an accountant (or agency) to handle your VAT returns and dealings with the tax office. Xolo provides services like Xolo Go and Xolo Leap, which help with precisely this and any other VAT concerns you may have.

Financial obligations of VAT registered freelancers in Ireland.

Once you are a VAT registered freelancer, you have to charge the appropriate VAT amount from your clients and maintain a record of all transactions. You should regularly file VAT returns and make required payments to the office of Revenue Commissioners every two months. In Ireland, you are required to submit tax returns and payments electronically or will have to pay a fine of €1520 on every transaction if you fail to do so.

Furthermore, you should also make sure to maintain a running total, including recent transactions, in your VAT account. You have to pay the difference between the VAT you charge and the VAT you were charged. If the amount you paid exceeds the amount you charged, Revenue Commissioners will pay the excess amount back to you.

VAT invoices are the EU’s version of tax receipts. You must ensure that all your VAT invoices are accurate and properly formatted to display the following details:

  1. The client’s and seller’s VAT identification number
  2. Description of the goods sold
  3. Total amount subjected to VAT
  4. The VAT rate, VAT amount due, and VAT included the total amount

You must also make sure to maintain copies of the following records for at least 6-10 years:

  • Received and sent invoices, business books, cash register tally rolls, receipts, and vouchers
  • Agreements on sell-billing
  • Bank statements
  • The self-billing vendors' names, addresses, and VAT numbers
  • Notes (debit/credit)
  • Records of imports and exports

It’s easy to lose or damage documents when you’re dealing with so many different aspects of your freelance business. Xolo can ensure that your records are stored, organised, and maintained in our system for as long as you need, so they’re easily accessible, and you don’t have to worry about misplacing them.

Reporting VAT as a freelancer

As a freelancer, you will generally need to report VAT every two months. However, there are some exceptions:

  • You may make monthly payments if you are in a constant repayment position
  • You may file annual returns if you are using direct debit for equal instalments
  • You may opt to make quarterly payments if your VAT liability is between €3,001 and €14,400
  • You may opt to pay twice per year if your VAT liability is equal to or below €3000 

How Xolo Can Help?

Learning all the Irish tax guidelines can be challenging, especially if you’re a sole proprietor and in charge of several aspects of your business. Luckily, at Xolo, we offer a range of solutions that can handle all the paperwork and legal jargon, allowing you to focus on your core competencies.

With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC. 

  • Signing up takes only 10 minutes, and once you do, taxation, corporate compliance, and all the tricky VAT calculations are all automatically taken care of in the background!
  • We charge a flat rate of 5% from every withdrawal to your personal bank account. No surprise fees, no contracts, and no BS.
  • Xolo Leap is the easiest and most effective way to create your own company through Estonian e-Residency! Reduce time spent on mundane business administration and focus on what you do best!
  • We offer different tiers of service depending on the solopreneur’s, or as we call them, Xolopreneur's, individual needs.
  • Once you get your business set up, you can literally run it from anywhere in the world! So whether you’re looking to gain access to the EU market or a digital nomad - this is the place for you! 

Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Ireland in no time!