Budget 2008 - VAT

VAT Registration Threshold for SMEs

The VAT registration thresholds for small businesses are being increased from €35,000 to €37,500 in the case of services, and from €70,000 to €75,000 in the case of goods. These increases will take effect from 1 May 2008.

Reduced VAT rate for certain agricultural inputs used to produce bio fuel

The VAT rate on the supply of seeds, and of roots, bulbs, rhizomes and similar supplies used for the agricultural production of bio fuel crops, e.g. elephant grass, will be reduced from 21% to 13.5% with effect from 1 March 2008.

Review of VAT on Property Transactions

Provision will be made in the Finance Bill for the introduction of a new system for applying VAT to property transactions. The changes are designed to simplify the rules, while ensuring a more equitable treatment for taxpayers. The new rules will apply to both residential and commercial property supplied in the course of business. The VAT charge on sales of residential property remains unchanged. The new system will take effect from 1 July 2008.

Reverse charge mechanism in the Construction Sector

A reverse charge mechanism for VAT on supplies made by a subcontractor to a principal contractor in the construction sector is being introduced with effect from 1 September 2008.

A reverse charge means that instead of the subcontractor charging VAT on his supply to a principal and accounting to Revenue for the VAT, the principal contractor will account to Revenue for the VAT. Both the subcontractor and the principal will continue to claim input credits.