Importing a tractor — VAT implications
Answer: There are four possible outcomes from a VAT point of view, and as a result, it’s an area that causes a lot of confusion, as well as significant tax risk, and the tax implications can only be fully determined when all circumstances are known. Firstly, if you are already registered for VAT, then the UK dealer should only charge you for the nett price for the tractor, and not add any VAT to the purchase price.
You notify the dealer of your VAT number, and he issues you with a VAT invoice which states clearly on it that you must self-account for the VAT under the reverse charge basis.
In your next VAT return, you raise a flag with Revenue that you have had an import, by filling out box E2 of your VAT return with the value of the goods bought from the UK. You must also enter the VAT that would have applied if the purchase was in Ireland in box T1 and T2 of the vat return.
For example, if the tractor cost €20,000 nett, then add €4,600 to box T1 and €4,600 to box T2, the effect of this is that you are paying Irish VAT on the import and simultaneously claiming back the VAT because you are a registered business entitled to reclaim the VAT.
In addition, your end of year return of trading details will have further details of the purchase from the UK.
If you are not registered for VAT then you will have to register for VAT if the tractor is new, even if you are not normally registered. In other words, you need to do a one-time registration purely for the purposes of paying Irish VAT on the tractor, and after the VAT is paid you can then de-register for VAT and resume farming as an unregistered farmer.
If the tractor is second-hand. it can also fall under these same rules if it is still seen as being “new” for VAT purposes. It would still be considered new for VAT purposes if it is supplied six months or less after the date of first entry into service; or has travelled 6,000 kilometres or less.
If you are not registered for VAT, and even if the tractor is not deemed new under the above provisions, then you may still have to register for VAT if the cost of the tractor plus any other imports is more than €41,000. You register for VAT by filling out a form TR1, available from Revenue, and then completing a VAT return paying Irish VAT over to Revenue after import. If you fall into this category, you must register and pay VAT. If you have unwittingly paid VAT in the UK, the Irish Revenue won’t take this as an excuse, and will look for the Irish VAT to be paid.
Finally, if you are not VAT registered, and the importation is not “new”, and the value of all your imports is less than €41,000, then the correct approach here is to simply pay UK VAT to the dealer.
The Farm Tractor and Machinery Trade Association has raised the issue of incidences of people importing foreign equipment using false VAT numbers, essentially importing the equipment without paying VAT in the EU country, and then avoiding their Irish liability by not registering and paying the Irish VAT as appropriate.
This is a slippery slope, because the foreign dealer is obliged to remit details of all persons to whom they have supplied machinery through the INTRASTAT and VIES VAT returns.
Additionally, any EU country can check whether any VAT number provided is valid, through VIES VAT Number Validation.
Revenue can, and do, check whether a supplier’s VAT returns stack up with the VAT returns of the owner of the VAT number, because EU supplies are detailed comprehensively by both. Where VAT returns don’t tie in together, then it’s a case of following the money trail to the actual purchaser.
It is critically important to get the VAT treatment correct on imports, because mistakes can result in VAT being paid in both countries.
Your questions on this and other farming tax issues are welcome.
As always, the tax rules are very much dependent on the specific circumstances at hand.
