In Ireland, businesses can generally recover the Value Added Tax (VAT) they pay on goods and services purchased for use in their business activities, provided that they are registered for VAT themselves.

The amount of VAT that can be recovered depends on the type of expense and the rate of VAT that was charged. In general, if the VAT on an expense is at the standard rate of 23%, the business can recover the full amount of VAT paid. However, if the VAT on an expense is at a reduced rate, such as 13.5% for certain goods and services, or at the zero rate for some exports, the amount of VAT that can be recovered will be reduced accordingly.

At a high level, VAT can only be recovered by a business providing VATable products or services. This means that the business charges VAT on sales to customers. You may think that a business providing only products or services subject to VAT can recover all VAT charged by its suppliers. However, that is not the case. Below are some examples where VAT cannot be reclaimed:

• It is never possible to recover VAT on the purchase of food and drink items for use in an office kitchen.

• If a business owner purchases items for personal use, VAT should not be recovered as that purchase has not been made to provide taxable (i.e. VATable) supplies.

• If a company carries on a trade and owns several rental properties, you must determine if the expense relates to the trade or the rental properties. For example, if repairs are carried out on the business premises and all supplies by the business are liable to VAT, the VAT charged can be recovered. However, if repairs are carried out on a rented residential apartment owned by the business, the VAT cannot be recovered as the rental income from the residential apartment is not liable to VAT.

• If foreign VAT has been charged to an Irish Business, the business should satisfy itself that this is correct before payment is made to the supplier. A business cannot include an input credit in an Irish VAT return for foreign VAT charged. A business can only include a claim for a VAT input credit where a valid VAT invoice has been received.

It’s important for businesses to keep accurate records of all VAT-related transactions and expenses, and to ensure that they comply with all relevant VAT regulations and guidelines. They may also want to consult with a tax professional or accountant to ensure that they are maximising their VAT recovery and minimising their VAT liabilities.

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