Standard VAT rate reverts to 23% on 1 March 2021

As part of the July 2020 Stimulus Package the Minister for Finance announced a temporary reduction in the standard rate of VAT for a six month period.  On 1 September 2020, the standard rate of VAT was reduced from 23% to 21%. The Minister recently confirmed that the rate will to revert to 23% on 1 March 2021. 

For most transactions between VAT registered traders, it will be “cash neutral”; however, there are a number of administrative issues to take into account. 

Invoices 

Credit notes

• Where on or after 1 March 2021 a VAT credit note or debit note relating to a supply of goods or services which contains a VAT adjustment and which is issued to a VAT registered person, a public body or a business carrying on a VAT exempt activity should show VAT at the rate in force at the time the original invoice was issued.
• Any VAT credit note or debit note relating to a supply of goods or services to a consumer on or after 1 March 2021 should show or include VAT at the rate in force at the time of the supply

Advance Payments

• If the goods or services are supplied on or after 1 March 2021, any advance payments, including deposits, received from VAT-registered persons can be categorised as follows:

• An advance payment received from an unregistered person is subject to VAT by reference to the rate in force at the time of the advance payment.

Contracts

In a situation where a contract has been entered into at the time the 21% VAT rate applies, and the contract is not completed before 1 March 2021 an adjustment to account for the increase in the VAT rate may be necessary in the absence of agreement to the contrary between the parties.

See our VAT page