In this article, you will be able to understand the:

• Definition of Postponed VAT Accounting
• Postponed VAT Accounting Process
• Benefits of Postponed VAT Accounting
• Explanation of Mandatory Postponed VAT Accounting
• VAT Registration Requirements for Postponed VAT Accounting
• Non-Mandatory Postponed VAT Accounting
• Deferment Account for Postponed VAT Accounting
• How to Account for Postponed VAT Accounting on VAT Returns
• Monthly Postponed Import VAT Statement
• Is Postponed VAT Accounting the Same as Reverse Charge?

Introduction

As businesses in Ireland continue to trade with countries outside the EU, managing import VAT can be a complex and costly process. However, the introduction of Postponed VAT Accounting (PVA) has simplified the process for VAT-registered businesses in Ireland. In this article, we will explore what PVA is, the benefits, mandatory requirements, registration requirements, how to account for it on VAT returns, and more.

What is Postponed VAT Accounting?

Postponed VAT Accounting is a scheme that enables VAT-registered businesses to account for import VAT on their VAT returns, rather than paying the VAT upfront at the time of import. The scheme was introduced by the UK government after Brexit to simplify VAT rules for businesses importing goods from the EU. This scheme has also been adopted by the Irish Revenue for VAT registered businesses in Ireland, to enable them to avoid paying import VAT upfront on goods imported from countries outside the EU.

Postponed VAT Accounting Process

The process for Postponed VAT Accounting involves the following steps:

1. Businesses must be registered for VAT in Ireland, have a valid VAT number, and be in compliance with VAT regulations.
2. Businesses must apply for the scheme by completing the relevant sections on their VAT return. They must also include the relevant customs documentation, such as the Single Administrative Document (SAD) or the electronic equivalent, with their VAT return.
3. When a business applies for Postponed VAT Accounting, they will receive a monthly statement of their postponed VAT account, which is a record of the VAT postponed on imports during the previous month. This statement will help businesses keep track of their postponed VAT liability and ensure they have sufficient funds to pay the VAT when it becomes due.

Benefits of Postponed VAT Accounting

Postponed VAT Accounting offers several benefits to businesses, including:

• Improved cash flow: By postponing the payment of import VAT until the VAT return is due, businesses can use the funds for other business expenses.
• Simplified import process: Businesses can avoid the need to pay customs duties and import VAT separately, which can reduce the administrative burden of importing goods.
• Enhanced VAT control: The monthly statement of the postponed VAT account enables businesses to keep track of their postponed VAT liability and ensure they have sufficient funds to pay the VAT when it becomes due.

Explanation of Mandatory Postponed VAT Accounting

Since January 1st, 2021, PVA has become mandatory for businesses importing goods from outside the EU and goods imported from Northern Ireland. This means that businesses must use the scheme to postpone import VAT payments and account for them on their VAT returns.

VAT Registration Requirements for Postponed VAT Accounting

To be eligible for Postponed VAT Accounting, businesses must be registered for VAT in Ireland, have a valid VAT number, and be in compliance with VAT regulations. The scheme is only applicable to VAT registered businesses and cannot be used by non-VAT registered businesses.

Non-Mandatory Postponed VAT Accounting

While PVA is mandatory for some businesses, it is not mandatory for all businesses. Businesses can choose not to use the scheme and pay import VAT upfront at the time of import. However, it is worth noting that businesses that choose not to use the scheme may face additional administrative burdens and cash flow challenges.

Deferment Account for Postponed VAT Accounting

Businesses that use Postponed VAT Accounting can use a deferment account to pay their import VAT liability. A deferment account enables businesses to delay payment of import VAT and customs duties until a later date. To use a deferment account, businesses must apply to Revenue for a Customs Deferment Account.

How to Account for Postponed VAT Accounting on VAT Returns

When businesses use Postponed VAT Accounting, they must account for their postponed VAT liability on their VAT return. The process for accounting for PVA on VAT returns involves the following steps:

1. In the VAT return, businesses must include the total value of goods imported from outside the EU and Northern Ireland during the return period.
2. Businesses must also include the total amount of import VAT postponed on these imports during the return period.
3. The postponed VAT should be included in Box 2 of the VAT return, which is the box for VAT due on acquisitions of goods from other EU Member States.
4. The VAT paid on these imports should be included in Box 4 of the VAT return, which is the box for VAT reclaimed on purchases.
5. The net amount of VAT due (Box 2 minus Box 4) should be included in Box 1 of the VAT return, which is the box for VAT due on sales and other outputs.

Monthly Postponed Import VAT Statement

Businesses that use Postponed VAT Accounting will receive a monthly statement of their postponed VAT account. This statement is a record of the VAT postponed on imports during the previous month and enables businesses to keep track of their postponed VAT liability. The statement should be checked carefully and any errors should be reported to Revenue immediately.

Is Postponed VAT Accounting the Same as Reverse Charge?

No, Postponed VAT Accounting is not the same as Reverse Charge. Reverse Charge is a mechanism that applies to certain supplies of goods and services within the EU and enables businesses to account for the VAT due on those supplies on their VAT returns, rather than paying the VAT to the supplier. Postponed VAT Accounting, on the other hand, applies to goods imported from outside the EU and enables businesses to postpone the payment of import VAT until the VAT return is due.

Conclusion

Postponed VAT Accounting is a valuable scheme for businesses importing goods from outside the EU or Northern Ireland. The scheme enables businesses to improve their cash flow, simplify the import process, and enhance VAT control. While PVA is mandatory for some businesses, it is not mandatory for all businesses. Businesses that choose to use the scheme must ensure they are registered for VAT in Ireland and comply with VAT regulations. By using PVA and following the correct procedures for accounting for it on VAT returns, businesses can benefit from reduced administrative burdens and improved financial management.