VAT Essentials for New Irish Companies: A Practical Guide

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Who should read this?

This guide is for businesses that sell to customers in the European Union and it covers the basics of VAT and VAT "One Stop Shop" VAT.

Key Takeaways

Irish VAT Thresholds: €85,000 for goods and €42,500 for services within a 12-month period.
Registration Timing: Register with Revenue once you approach thresholds to avoid retroactive liability, but don't register prematurely and create unnecessary administrative burden.
Cross-Border Sales: Different rules apply for B2B vs B2C sales across EU borders, with a €10,000 annual threshold for B2C sales before destination-based VAT rates apply.
VAT One Stop Shop: Simplifies compliance for businesses selling to consumers across multiple EU countries through a single registration and return.
Record-Keeping: Maintain evidence of customer status and location for at least six years to ensure compliance with Revenue requirements.
Return Filing: Irish VAT returns are typically filed quarterly through ROS, with penalties for late filing.

Understanding VAT for New Founders

As a new founder establishing your business in Ireland, understanding Value-Added Tax (VAT) obligations is really important to avoid getting on the wring side of the taxman.

VAT applies to goods and services sold throughout the European Union, including digital products and physical merchandise.

When Irish Startups Must Register for VAT

The decision of when to register for VAT depends primarily on your company's turnover and business model. In Ireland, there are two distinct VAT registration thresholds (as at 2025):

€85,000 for businesses primarily selling goods
€42,500 for businesses primarily providing services

If your annual turnover remains below these thresholds, VAT registration is optional. However, once exceeded, registration becomes mandatory within 30 days. In practice, it is common to register when you are approaching those figures or know that you are going to surpass them.

The Irish VAT Registration Process

Registering for VAT in Ireland involves submitting an application to the Revenue Commissioners through their Revenue Online Service (ROS). You'll need to provide:

Your company's legal structure and registration details
Estimated annual turnover
Business bank account information
Details of company directors or partners

The process typically takes 2-3 weeks, though we've seen cases where approval comes through in as little as 5-7 working days. Once registered, you'll receive a VAT identification number that must appear on all invoices.

Common VAT Mistakes Made by Irish Startups

In our work with founders, we've observed several recurring VAT issues:

We recently advised a technology startup that registered for VAT prematurely, six months before reaching the service threshold.

While not an error per se, it created an unnecessary administrative burden because that company was required to file VAT returns every two months from the point of registration, despite minimal input VAT to reclaim. That founder spent valuable time preparing filings rather than focusing on product development.

With that said, if you are going to make a mistake, make sure you do it by registering too early rather than too late!

How VAT Works in Practice

To illustrate VAT in action, consider this example:

A Dublin-based furniture maker sells a handcrafted desk to a retailer for €2,000. At Ireland's standard 23% VAT rate, the retailer pays €2,460 (€2,000 plus €460 VAT). The furniture maker must report and remit this €460 to Revenue.

The retailer then sells the desk to a customer for €3,000 plus VAT, charging €3,690 total. When filing VAT returns, the retailer remits only €230 to Revenue (€690 collected minus €460 already paid to the supplier).

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VAT Supply Chain Example

Manufacturer

Furniture maker creates a handcrafted table

Base Price

€1,000.00

VAT (23%)

€230.00

Total Price

€1,230.00

↓

Retailer

Dublin retailer purchases table and adds markup

Cost from Manufacturer

€1,000.00

VAT Paid

€230.00

New Selling Price

€1,500.00

↓

Customer

End customer purchases the table

Base Price

€1,500.00

VAT (23%)

€345.00

Total Price

€1,845.00

↓

VAT Return Filing

Retailer files VAT return with Revenue Commissioners

VAT Collected

€345.00

VAT Paid to Supplier

€230.00

VAT Owed to Revenue

€115.00

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Cross-Border Considerations

For Irish startups selling to other EU countries, different rules apply depending on whether your customer is a business (B2B) or consumer (B2C):

For B2B sales within the EU, you generally don't charge VAT if your customer provides a valid VAT number. The responsibility for accounting for VAT transfers to your customer under the reverse charge mechanism.

For B2C sales, once you exceed €10,000 in annual cross-border sales, you must register for VAT in each customer's country or register for the VAT One Stop Shop (OSS) scheme through Revenue.

VAT OSS: Simplifying EU Compliance

The VAT OSS system allows Irish businesses to file a single quarterly return covering all EU sales, rather than registering separately in each country. This significantly reduces administrative complexity for startups expanding across Europe.

Through Revenue's OSS portal, you report sales by country and apply the appropriate VAT rates. Revenue then distributes collected VAT to the respective member states automatically.

Documentation Requirements

Proper record-keeping is essential. You must maintain:

Valid VAT invoices for all transactions
Evidence of customer location for digital sales (at least two data points such as billing address and IP location)
Records of all VAT returns filed
Supporting documentation for cross-border transactions

These records must be retained for six years in Ireland, though other EU jurisdictions may require longer retention periods.

Filing VAT Returns

In Ireland, VAT returns are typically filed bi-monthly (every two months), though newly registered businesses may initially be placed on monthly filing. You must report:

VAT charged on sales (output VAT)
VAT paid on purchases (input VAT)
The net amount due to Revenue

Returns must be submitted and payments made by the 23rd day of the month following the end of your taxable period. Late filing or underpayment can result in interest charges of 8% per annum and potential penalties of up to 10% of the VAT due.

Conclusion

While VAT compliance involves administrative effort, establishing proper procedures early saves significant time and resources as your business grows. Consider consulting with a tax advisor experienced in startup operations before making registration decisions, as strategic timing can optimise your cash flow and administrative overhead.

With careful planning, VAT compliance need not be burdensome—it can even benefit your business through VAT reclaims on business expenses and by positioning your company for seamless European expansion.

Frequently Asked Questions

When should my Irish startup register for VAT?

Register for VAT when your taxable turnover approaches the relevant threshold (€85,000 for goods, €42,500 for services) within any 12-month period. You can also register voluntarily before reaching these thresholds if it benefits your business, such as when you need to reclaim VAT on significant business expenses.

Can I reclaim VAT on expenses before I'm VAT registered?

No. You can only reclaim VAT on business purchases made after your VAT registration date. This is why timing your registration carefully matters – register too late and you miss out on input VAT recovery.

How do I determine if I need to charge VAT to an EU business customer?

If your EU business customer provides a valid VAT number (which you should verify through the VIES portal), you generally don't charge VAT. Instead, document the sale as exempt under the reverse charge mechanism, noting "VAT reverse charge" on your invoice.

What happens if I exceed the €10,000 threshold for B2C sales to other EU countries?

Once you exceed the €10,000 threshold, you must either register for VAT in each customer's country or register for the VAT One Stop Shop (OSS) through the Irish Revenue. The OSS allows you to file a single quarterly return covering all EU sales.

How often do I need to file VAT returns in Ireland?

Most Irish businesses file VAT returns quarterly. However, depending on your circumstances, you may be approved for monthly or bi-monthly returns. New businesses typically start with quarterly filing periods.

What evidence do I need to keep for B2C digital sales?

You should keep at least two pieces of non-contradictory evidence of your customer's location, such as billing address, IP address, bank location, or country of card issue. This evidence must be stored for six years under Irish tax law.

Can I de-register for VAT if my turnover falls below the threshold?

Yes. If your turnover falls below the registration threshold and you expect it to remain there, you can apply to cancel your VAT registration. However, you may need to repay some VAT previously reclaimed on capital items.

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