Sole Trader Vat Exempt query

irishgeo

is it possible to set myself up as a sole trader and become VAT exempt therefore allowing me to buy goods at trade prices and then sell them on again. this would be mainly computer and electronic goods.

I would not be making over the VAT Limit per year.

I would be correct in saying then that i would only have to file an income tax return.

jimmii

You wouldn't be exempt from paying VAT you would still have to pay the VAT on goods you purchase to sell on you just wouldn't need to charge VAT on the goods you are selling or do a VAT return.

Check out the revenue website for more VAT info http://www.revenue.ie/en/tax/vat/

Peterdalkey

If you are selling exclusively to VAT exempt buyers, either VAT registered in the EU, or tax resident outside the EE, it may be an option under section 13b see this http://www.grantthornton.ie/db/Attachments/VAT-Matters-Sept-2011.pdf

irishgeo

jimmii wrote: »

You wouldn't be exempt from paying VAT you would still have to pay the VAT on goods you purchase to sell on you just wouldn't need to charge VAT on the goods you are selling or do a VAT return.

Check out the revenue website for more VAT info http://www.revenue.ie/en/tax/vat/

i knew there was a spanner in the works.


why do still have to pay the VAT if i am VAT exempt?

Peterdalkey

irishgeo wrote: »

i knew there was a spanner in the works.


why do still have to pay the VAT if i am VAT exempt?

How do you reckon you are VAT exempt, unless you think that being unregistered somehow makes you magically exempt!

irishgeo

Peterdalkey wrote: »

How do you reckon you are VAT exempt, unless you think that being unregistered somehow makes you magically exempt!

I thought you were exempt if you were below the threshold.

Peterdalkey

irishgeo wrote: »

I thought you were exempt if you were below the threshold.

You are not exempt, if you were, nobody would charge you VAT. You are unregistered, which means you cannot claim or charge VAT... Nothing more but certainly not exempt!

jimmii

irishgeo wrote: »

I thought you were exempt if you were below the threshold.

Being under the threshold just means you don't have to charge VAT but will still be charged by other VAT registered companies or on imports over €22 from outside the EU and it will mean you won't be able to claim that VAT paid back. Not registering for VAT is just going to save you a little bit of paperwork not much else.

booladen

irishgeo wrote: »

i knew there was a spanner in the works.


why do still have to pay the VAT if i am VAT exempt?

Correct me if im wrong but,

You pay VAT on goods that you cannot claim back, but,
You sell your goods and do not pay the VAT on them so you are canceling them out.

Just price your goods with the VAT you paid included so you dont loose anything.

relaxed

jimmii wrote: »

Being under the threshold just means you don't have to charge VAT but will still be charged by other VAT registered companies or on imports over €22 from outside the EU and it will mean you won't be able to claim that VAT paid back. Not registering for VAT is just going to save you a little bit of paperwork not much else.

I think it will save more than that. Take for example you buy 20 Hi Spec laptops for €1000 each + VAT.

You spend €20000 x 1.23 = 24600

You sell them for €1800 = €36000

Profit = €11400 as you are not VAT registered.

Suppose you are VAT Registered, you buy them for €20000 + VAT but claim the VAT back, so you buy them for €20000.

You sell them for €36000 including 23% VAT, so you sell them for €29268 Nett

Profit = €9268

So VAT registered you make €9628, not VAT registered you make €11400

dbran

relaxed wrote: »

I think it will save more than that. Take for example you buy 20 Hi Spec laptops for €1000 each + VAT.

You spend €20000 x 1.23 = 24600

You sell them for €1800 = €36000

Profit = €11400 as you are not VAT registered.

Suppose you are VAT Registered, you buy them for €20000 + VAT but claim the VAT back, so you buy them for €20000.

You sell them for €36000 including 23% VAT, so you sell them for €29268 Nett

Profit = €9268

So VAT registered you make €9628, not VAT registered you make €11400

Perhaps but not necessarily. This assumes that you are selling to people who are themselves not VAT registered or cannot recover the VAT. If you are selling to VAT registered customers you may be able to charge €36000 plus VAT and make €16000.

The bottom line is if you are not VAT registered VAT on your purchases is a cost to you and you need to do the maths and work out your margin and decide which is better for you.

Best Regards


dbran

jimmii

relaxed wrote: »

I think it will save more than that.

Interesting to see it done like that! The way I always saw it was a pretty simplistic "double your money" approach. I guess everyones situation is going to be different so there really is no general right answer to whether someone should register or not.

VAT registered
Item cost €1+VAT you sell it at €2+VAT = €2.46

Non-VAT registered
Item cost €1.23 you sell it at €2.46

So the non-registered person makes more money at the same price but makes the same margin.

One other benefit being VAT registered is not having to pay VAT on orders from other EU countries which is definitely a cash flow plus imo.

relaxed

jimmii wrote: »

Interesting to see it done like that! The way I always saw it was a pretty simplistic "double your money" approach. I guess everyones situation is going to be different so there really is no general right answer to whether someone should register or not.

VAT registered
Item cost €1+VAT you sell it at €2+VAT = €2.46

Non-VAT registered
Item cost €1.23 you sell it at €2.46

So the non-registered person makes more money at the same price but makes the same margin.

One other benefit being VAT registered is not having to pay VAT on orders from other EU countries which is definitely a cash flow plus imo.

Another benefit is you can get the VAT back on running expenses like phone, broadband, maybe a VAT etc.

Ultimately though I think it is not an advantage being VAT registered unless you are dealing mainly with business clients as they will be reclaiming the VAT anyway.

irishgeo

Interesting advice.