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.
- 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
- 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.
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.