Conditions for registering as a VAT payer have been changed in Ireland

One of the key developments for those considering register a company in Ireland or is already doing business in this jurisdiction, the following has become known: The country's tax authorities have published eBrief No. 297/24, explaining the recent changes to value added tax (VAT) legislation approved by the Finance Act 2024. These changes concern key aspects of taxation, including increasing the turnover thresholds for registering VAT payers, extending the application of a reduced VAT rate for certain goods and services.

In this publication, we will look at what exactly has changed and how it will affect VAT payers or those who are just planning to open a business in Ireland.

Raising thresholds for VAT registration in Ireland

One of the significant changes is the increase in the turnover limit for registering VAT taxpayers. From 1 January 2025, the threshold for registering VAT for supplies of goods will increase to €85,000 and for supplies of services to €42,500.

This change will benefit small business in Ireland, since the process of registering as a VAT payer will be greatly simplified for him. In other words, SMEs can avoid mandatory VAT registration if their turnover does not exceed established thresholds. Such changes make the tax system more flexible and focused on supporting small businesses, allowing companies with low turnover to focus on growth without additional tax obligations.

Temporary extension of the reduced VAT rate in Ireland

Should you harbor curiosity regarding enterprise incorporation in Ireland, be apprised that, pursuant to novel fiscal amendments, the implementation of the diminished VAT tariff of 9% for provisions of gaseous fuels and electrical energy has been provisionally prolonged. This concession shall persist until the terminus of April 30, 2025, conferring a modicum of pecuniary steadiness amidst the ascent of energy expenditures. Such a stratagem constitutes an alleviative intervention designed to attenuate the levied fiscal encumbrance upon end-users and commercial entities reliant on gaseous and electrical resources for their operational endeavors.

In addition, the new 9% VAT rate will apply to heat pump heating systems that have low carbon emissions. This innovation is part of Ireland's efforts to combat climate change and support clean technology.

Changes to VAT deduction and expense reimbursement

Changes have been made regarding the deduction of VAT when liquidation of a company in Ireland. These changes concern the introduction of clear provisions on the regulation of tax obligations in the process business liquidation in Ireland, which will provide greater transparency and simplification of the procedure. In turn, changes were introduced to the rules for reimbursement of expenses for personal services. This change will benefit businesses that previously had difficulty recovering such expenses and will now be able to manage their tax obligations more effectively.

Change in VAT rate for farmers

An additional alteration constitutes the augmentation in the VAT proportion for fixed-compensation agriculturists. Commencing January 1, 2025, this percentage shall ascend from 4.8% to 5.1%. The escalation forms a segment of an extensive fiscal modification designed to furnish agriculturists with equitable levy handling, aligning with transformations in the macroeconomy and requisition for agronomic commodities.

Conclusion

The changes to VAT legislation reflected in the Finance Act 2024 are an important step in reforming Ireland's tax system. Increasing thresholds for VAT registration, extending the reduced rate for energy and heat pumps, changes to VAT deductions and reimbursement of expenses are all aimed at creating more favorable tax conditions for business in Ireland and stimulating economic growth.

These changes, which will come into force in 2025, will affect not only small and medium-sized enterprises, but also farmers, energy consumers and those working in clean technologies. These measures are expected to have a positive impact on the Irish market, promoting business growth and improving the overall tax environment.

We offer professional support in matters business structuring in Ireland, as well as accounting services and advice on other issues related to doing business in this country.