As part of the July Stimulus Package the Minister for Finance announced a temporary reduction in the standard rate of VAT for a six month period. On 1 September 2020, the standard rate of VAT will change from 23% to 21%. The rate is due to revert to 23% with effect from 1 March 2021.
For most transactions between VAT registered traders, it will be “cash neutral”; however, there are a number of administrative issues to take into account.
Traders Operating on Cash Receipts Basis
Invoices
- A trader on the cash receipts basis who is required to issue a VAT invoice to another VAT registered person should show the VAT rate which applies on the date of the supply, not on the date of receipt of payment.
- Goods or services supplied to consumers (unregistered persons) prior to 01 September 2020 are taxable at the 23% rate regardless of when payment is received.
Credit notes
- Where on or after 1 September 2020 a VAT credit note or debit note relating to a supply of goods or services which contains a VAT adjustment and which is issued to a VAT registered person, a public body or a business carrying on a VAT exempt activity should show VAT at the rate in force at the time of the supply.
- Any VAT credit note or debit note relating to a supply of goods or services to a consumer on or after the 1 September 2020 should show or include VAT at the rate in force at the time of the supply.
Traders operating on an Invoice basis
Invoices
- On or after 1 September 2020 VAT invoices issued by a VAT registered person to a VAT registered person, a public body or a business carrying on a VAT exempt activity should show VAT at the new 21% rate. This applies even if the goods or services were supplied before this date.
- Goods or services which are actually supplied to consumers (unregistered persons) prior to 1 September 2020 are taxable at the 23% rate even though they may be invoiced after 1 September 2020.
Credit Notes
- Where on or after 1 September 2020 a VAT credit note or debit note relating to a supply of goods or services which contains a VAT adjustment and which is issued to a VAT registered person, a public body or a business carrying on a VAT exempt activity should show VAT at the rate in force at the time the original invoice issued.
- Any VAT credit note or debit note relating to a supply of goods or services to a consumer on or after the 1 September 2020 should show or include VAT at the rate in force at the time of the supply.
Should you have any queries in respect of this measure please do not hesitate to contact us on 07493 21420 or info@mlmg.ie.
