The Bill includes measures confirming the Budget announcement that the VAT registration thresholds will increase. The new thresholds, applying from 1 January 2025, will increase for supplies of goods from €80,000 to €85,000 and for supplies of services from €40,000 to €42,500. The thresholds depend on turnover from taxable supplies in any continuous 12-month period.
The increase in Ireland’s domestic VAT registration thresholds is in keeping with a package of EU-wide measures aimed at simplifying VAT compliance for SMEs, which is due to take effect from 1 January 2025 onwards (referred to hereafter as the “SME VAT Package”). The SME VAT Package allows EU Member States to set their VAT registration thresholds at a turnover value of up to €85,000 per annum.
Although not specifically addressed in the Finance Bill, the EU SME VAT Package measures will also introduce a new EU “cross-border” VAT registration threshold from 1 January 2025 for non-established businesses. Currently, a nil VAT registration threshold generally applies to non-established businesses when they make taxable supplies on which they are liable to account for Irish VAT. Under the SME VAT Package, from 1 January 2025, non-established traders can elect not to register for VAT in an EU Member State in which they are not established, if:
- The SME’s annual turnover from supplies across the EU does not exceed €100,000; and,
- The SME’s turnover from supplies in the relevant Member State (in which they are not established) does not exceed the relevant domestic VAT registration threshold in that Member State.
However, an SME wishing to avail of this new cross-border threshold must register to obtain a special VAT number (which will have an ‘EX’ prefix) and must report quarterly to their local tax authority their sales in the other EU Member States in which they are not VAT registered. We anticipate that the SME VAT Package will be introduced into Irish VAT law by way of a separate statutory instrument on or before 1 January 2025.
It is important to note that there continues to be a “nil” turnover threshold for Irish established businesses in receipt of taxable services from abroad on which they are subject to reverse charge VAT.