Export Business - How does VAT work?

Q. I am in the process of establishing an export business in the west. I am sourcing a manufacturer for my product in Ireland and all of my sales will be abroad — 50 per cent US and 50 per cent in Europe. I will be selling to distributors in a number of countries. I am very confused on the VAT treatment. How does it work?

EU Sales

You may zero rate the supply goods to a person registered for VAT in another Member State where the following conditions are met:

1. You obtain proof of dispatch to another Member State,

2. The customer's VAT number is obtained and retained.

3. The customer's VAT number and the supplier's VAT number are quoted on the invoice.

4. The invoice must be a valid VAT invoice.

The general rule is that the place of supply of intra-Community supplies is the place where transport begins. In your case this is Ireland so the zero-rate of VAT applies. However it is your obligation to prove that the requirements for zero-rating have been met so you must be careful in retaining records.

US Sales

As the place of supply of goods is Ireland, this is to be a zero-rated supply as the goods are dispatched outside the Community. The term "export" means the dispatch of goods from a member state directly to a place outside of the Community.

You need to be able to satisfy Revenue that the goods were in fact dispatched to a place outside the Community. The type of acceptable evidence of export includes, bills of lading, certificates of shipment, air waybills, export SADs and proof of postage. Purchases

Since all of your sales are zero-rated exports or intra-Community supplies, you are entitled to avail of the VAT 13A system which was enacted to allow exporters receive almost all their goods and services at the zero rate. You need to make an application to your local Inspector of Taxes on a Form 13A.

Where authorisation is granted a form 13B will issue. You must send a copy of the 13B to each of your suppliers in the State. Those suppliers are then obliged to quote this authorisation number on all invoices issued to you, and zero-rate all their supplies of goods and services to you.

It is possible for a trader in a start-up situation to make an application on the basis that it is envisaged that zero rated supplies in the first year of trading will be of a sufficient level to qualify the trader for authorisation. A statement from the IDA or other similar body to this effect should accompany such an application. Each authorisation is valid for a specific period as determined by Revenue.


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