Basic VAT/expenses question

Bicky

Hello,
I was hoping someone could clear something up for me. Is it correct to say that if a (VAT registered) business is purchasing a product or service, for use in its own business, then it does not pay the VAT on that item?
Eg If i own a restaurant and wanted to purchase a table for that business.
I purchase a table in IKEA and pay 122(including VAT). Can i then apply to reclaim this 22 euro from the government.
Also is it right to say that the 100(which i have a reciept for) can then be taken off the value of any VAT bill my business owes, as an expense.
If an item is purchased from the internet and (eg UK) VAT is paid can this be claimed as an expense.
Sorry if these questions are simultaneously simple and confusing. I tried googling but received a wall of VAT related information. I am not actually in business myself but am just interested.
thanks

drunkmonkey

Your kind of right, let's say you but that thing in IKEA, you claim back the 22 from your vat but the 100 would be against your tax bill as a business expense. Only the 22 was vat so that all that can be claimed in vat.

ted1

You don't pay VAT on goods purchased outside Ireland and within the EU.

Joe10000

You cannot offset the €100 against your VAT bill as it contains no VAT.

Wereghost

ted1 wrote: »

You don't pay VAT on goods purchased outside Ireland and within the EU.

True provided that the rules for intra-Community supplies are met. The person buying the goods needs to be registered for VAT here and the invoice from the foreign supplier needs to show the customer's full Irish VAT reference. The goods must also be delivered to this country by or on behalf of the seller.

Once all this is done, the seller doesn't charge VAT locally but the purchaser becomes liable to Irish VAT on receipt of the goods. The purchaser accounts for VAT as a sale but can reclaim it as purchases VAT if and to the extent that it's for their VATable business activity.

Alternatively, if the purchaser is not VAT-registered then the seller will charge VAT in their own country or here, depending on whether they're registered for distance sales. This will generally not be reclaimable by the purchaser.

DubTony

Scrawny71 wrote: »

True provided that the rules for intra-Community supplies are met. The person buying the goods needs to be registered for VAT here and the invoice from the foreign supplier needs to show the customer's full Irish VAT reference. The goods must also be delivered to this country by or on behalf of the seller.

Once all this is done, the seller doesn't charge VAT locally but the purchaser becomes liable to Irish VAT on receipt of the goods. The purchaser accounts for VAT as a sale but can reclaim it as purchases VAT if and to the extent that it's for their VATable business activity.

Alternatively, if the purchaser is not VAT-registered then the seller will charge VAT in their own country or here, depending on whether they're registered for distance sales. This will generally not be reclaimable by the purchaser.

Nice way to complicate an already easily misunderstood system.

OP, here's the deal. I'll keep it simple.

If you're VAT registered you can claim back all VAT you pay to suppliers.
If you're not VAT registered you can't.

If you're buying from a supplier in an EU country, that supplier won't charge you VAT if he has your VAT details. You should provide foreign suppliers with your VAT number exactly as it appears on the registration do cument you received when you registered.
When / if you sell the goods you purchase, you simply charge the appropriate VAT on the item.
If you're buying online and are charged VAT, the VAT charged is a legitimate business expense and so is offset against profits, as is the VAT exclusive cost of the items. Corporation tax is 12.5%, a lot less than the VAT you will pay, so you'd lose out there. Best not to pay the VAT at all in the first place.

Wereghost

DubTony wrote: »

Nice way to complicate an already easily misunderstood system.

OP, here's the deal. I'll keep it simple.

If you're VAT registered you can claim back all VAT you pay to suppliers.

http://www.revenue.ie/en/tax/vat/leaflets/index.html
Fourth Guide down, chapter 2. It's short and clear.

DubTony

Scrawny71 wrote: »

http://www.revenue.ie/en/tax/vat/leaflets/index.html
Fourth Guide down, chapter 2. It's short and clear.

Hardly. 😉