Farmers who engage solely in agricultural activities are not obliged to register for VAT, irrespective of turnover. This also includes farming companies.
However, if you operate a contracting business or other type of service, you will be required to registrar for VAT if your turnover exceeds €37,500 per annum.
Outside of this, some farmers still elect to register for VAT.
Flat rate refund
Farmers receive a VAT called ‘flat rate refund’, which is 5.6% on all sales of farm produce.
This flat rate refund is available to all farmers who are not registered for VAT.
This refund on VAT on farm produce sales can help to offset the annual VAT cost of farm inputs and services, with the exception of feed stuffs, fertilisers, seeds and oral animal medicines.
Unregistered farmers' VAT refunds
As of 1 January 2019, unregistered farmers can claim VAT refunds on farm buildings, land drainage, land reclamation, hedgerows and underpasses and fixed plant items.
These claims can be made using the online eRepayments system.
All claims must be made within four years from the end of the taxable period to which the claim relates.
Each claim must be greater than €125.
To make a claim on eRepayments, you will need the invoice number, the supplier details and the amount of VAT being claimed.
All supporting documents such as invoices to your claim should be retained by you for six years in case Revenue needs to inspect them.
You do not need to include these documents in your claim unless requested to do so.
VAT in relation to registered farmers
You or your tax adviser can register your farm business for VAT using the Revenue's Online Services (ROS).
VAT registration is effective from a date agreed by your local tax district and yourself, after your completed application has been received by Revenue.
If you elect to register, the effective date will not be earlier than the beginning of the taxable period during which you make the application.
Once you register for VAT, you must submit tax returns and payments electronically.
It is necessary to retain all invoices for these VAT returns.
If you are VAT-registered, you do not collect flat rate VAT like unregistered farmers.
As a registered farmer, you can reclaim VAT of 4.8% on purchases of stock from unregistered farmers.
Why elect to register for VAT?
It would only be worthwhile to register for VAT if your day-to-day purchases contain more VAT than the VAT you would have to pay on sales.
Farmers who operate a contracting business or other type of service where the turnover exceeds €37,500 must register for VAT.
Only about 10% of farmers in Ireland are VAT registered.
Register and de-register for VAT
If you are registered for VAT, you may cancel this registration at any time by contacting your Revenue district, either yourself or by asking your tax adviser.
In this situation, you will be liable to repay the net benefit, if applicable, for the previous three years prior to the date of application for cancellation.
Claiming back VAT, whether registered or unregistered, can have consequences if you sell your farm or cease farming, so it is vitally important that you get expert advice.
There are a number of occasions where VAT can be clawed back or where a disposal may be liable to VAT.
Basic payment entitlements and VAT
If a farmer sells single farm payments and the proceeds exceed €37,500, the transaction is liable to VAT at 23%.
The seller must register for VAT with regard to this particular transaction if not already registered.
The farmer who purchases these entitlements is not entitled to reclaim the VAT unless he is already VAT registered.
It is always worthwhile reviewing your current situation and expected future farming pattern with your tax adviser or accountant to see whether it is worthwhile to register for VAT or not.