Businesses based in Ireland who provide electronically supplied services (e-services) to customers need to understand how to apply VAT correctly, explains Siobhán O'Hea, Partner of Tax Services.
Value Added Tax can be a complicated area for businesses who provide electronically supplied services to customers in the EU or elsewhere.
While the rules may appear daunting, it is important to familiarise yourself with the basics as getting it wrong can be costly.
What are e-services?
The first step in getting to grips with VAT is understanding what is considered an 'electronically supplied service' for VAT purposes.
Electronically supplied services, sometimes called 'e-services', cover a broad range of services delivered over the Internet or an electronic network. Examples include electronically supplied software and software updates, web hosting, online publications and e-books, the provision of online advertising on websites, music downloads, online games, distance learning programmes which are delivered wholly online without human intervention, and so on.
What these services have in common is that they could not be provided in the absence of information technology.
Tangible products, such CDs and DVDs or printed matter such as books, newspapers and journals, are not e-services even though they may be purchased online.
It is beyond the scope of this article to list everything that is, or is not, considered an e-service, however detailed listings can be found on Revenue website.
If you are in any doubt, it is advisable to seek advice from an experienced tax practitioner familiar with VAT as there is a risk that if you make an error on a sale, you will repeat it on subsequent sales. Errors that go unnoticed for a period of time can be very expensive in the long run.
Place of supply and your customer
Once you have determined whether or not your services are 'e-services' for the purposes of VAT, the next step is to look at the 'place of supply'. This is because 'place of supply' rules determine whether a supply is subject to VAT.
If your customer is a business, the place of supply is the place where the business receiving the services is established. Businesses based in...