VAT on software in Ireland depends on the supply, the customer’s status and where the customer belongs. Standard software supplied domestically is normally subject to 23% Irish VAT. Overseas business sales and EU consumer subscriptions can require different invoice codes and reporting.
This guide is for Irish businesses selling software subscriptions. The practical job is to carry the VAT decision from checkout into the accounts. A correct-looking invoice is only the start.
Photo: Kari Shea on Unsplash. Stock image.
Start with what you supply
Automated access to software generally falls within electronically supplied services. Separately delivered consultancy, live training or substantial human-led implementation may need a different analysis. A service does not become electronic simply because the customer buys it online.
Read the contract and identify what the customer receives. Where access and other services are bundled, assess the VAT treatment of the package rather than assuming that separate invoice lines settle the question.
Revenue classifies ordinary computer software at the standard rate, currently 23%. Whether Irish VAT applies to an overseas transaction is a separate question.
The table below assumes a VAT-registered seller established only in Ireland, selling automated software access directly. It assumes no applicable exemption. Foreign establishments, marketplaces acting as the supplier and specialist service bundles need their own assessment.
Which VAT treatment should an Irish software seller use?
Business-to-business (B2B) sales and business-to-consumer (B2C) sales follow different rules. Check both customer status and location before applying a code.
| Customer | Usual treatment under these assumptions | Billing check |
|---|---|---|
| Irish business or consumer | Charge 23% Irish VAT. | Separate the net price and Irish VAT. |
| Business in another EU Member State | Normally no Irish VAT; the customer applies the reverse charge. | Confirm business status, validate the VAT number and identify the establishment receiving the service. |
| Consumer in another EU Member State | Normally the customer’s country’s VAT. A qualifying €10,000 exception can retain Irish treatment. | Confirm location and whether the exception or destination treatment applies. |
| Business outside the EU | Normally no Irish VAT under the general business-service rule. | Keep evidence of business status and establishment. |
| Consumer outside the EU | Electronically supplied services are generally outside Irish VAT, subject to relevant use and enjoyment rules. | Verify location and check local indirect-tax obligations. |
See Revenue’s general place-of-supply rules, electronic-services guidance and non-EU consumer exceptions.
An overseas customer is not enough to select a no-Irish-VAT code. Establish the reason, retain the evidence and route the transaction correctly. A reverse-charge sale and a domestic zero-rated supply are different treatments.
The €10,000 exception is a combined EU threshold
For a supplier established in only one Member State, the exception can allow relevant cross-border EU consumer sales to remain subject to supplier-country VAT. The combined value, excluding VAT, must not exceed €10,000 in either the current or preceding calendar year.
The total includes relevant cross-border telecommunications, broadcasting and electronic services and intra-EU distance sales of goods. It is not €10,000 for each country, customer or product.
A qualifying seller can choose destination-country treatment instead. That choice binds it for two calendar years. When the threshold is exceeded, destination treatment applies, so monitor the total before the next billing run.
For example, a fictional seller with €8,000 of relevant software sales and €3,000 of relevant distance sales has €11,000 combined turnover. Testing software alone would miss the threshold.
This place-of-supply exception is separate from domestic VAT-registration thresholds. Our Irish VAT threshold guide covers the registration question.
Check the business customer before applying reverse charge
For a business customer in another EU Member State, validate the VAT number and retain the result with the customer record. Include the customer’s number and reverse-charge indication on the invoice. Taxable qualifying services also belong on the relevant VAT Information Exchange System (VIES) return.
A new business awaiting its VAT number needs specific supporting documentation. An empty field or an invalid number should trigger a review rather than automatically approving the sale as B2B.
For non-EU business customers, keep evidence of both their business status and overseas establishment. Revenue sets out these customer-status and invoice obligations.
Useful billing controls include a review queue for conflicting country information, failed VAT-number checks and changes to customer status. Decide who resolves those exceptions before the next invoice.
What does Union OSS cover?
The Union One Stop Shop, or OSS, lets an eligible Irish seller report qualifying EU consumer VAT through one registration in Ireland. It does not replace the domestic VAT return or cover ordinary reverse-charge B2B sales.
For covered transactions, use the VAT rate of the customer’s Member State. Irish domestic services stay in the Irish return. Once registered, the seller must use the scheme for supplies falling within it.
Union OSS returns are quarterly. The return and payment are due by the end of the following month. Relevant records must be retained for ten years. Input VAT is not deducted through the OSS return.
The Revenue Union OSS manual explains the scheme’s scope, filing and records. Keep a separate OSS control balance in the accounts so these liabilities can be reconciled. Our ongoing tax and VAT support explains the wider service scope.
Worked example: four €1,000 software sales
This fictional illustration assumes four completed supplies in one month, all paid, with no refunds or credit notes. Each price is €1,000 before VAT. The seller uses destination VAT for qualifying EU consumer sales through Union OSS. The French consumer is in mainland France, where the standard rate is 20%. Customer status and location have been checked.
| Sale | Net | VAT charged | Customer pays |
|---|---|---|---|
| Irish business | €1,000 | €230 Irish VAT | €1,230 |
| French business, qualifying reverse charge | €1,000 | €0 charged by the Irish seller | €1,000 |
| French consumer, Union OSS | €1,000 | €200 French VAT | €1,200 |
| US business, general B2B rule | €1,000 | €0 Irish VAT | €1,000 |
| Totals | €4,000 | €430 | €4,430 |
The €430 is split between €230 of Irish output VAT and €200 of French VAT reported through OSS. It is not all Irish VAT, and the receipts are not €4,430 of sales income.
Suppose the payment processor deducts €70 in fees and pays €4,360 into the bank. The reconciliation is:
€4,430 gross receipts − €70 processor fees = €4,360 bank payout.
The accounts still need the €4,000 net sales, €430 VAT liability and €70 fee separately. Coding the payout straight to sales would overstate net sales by €360 and hide the VAT and fee entries.
These figures describe the example’s completed sales. Annual subscriptions paid in advance require a separate revenue-recognition assessment; bank receipts alone do not determine monthly revenue. Our SaaS accounting guide covers that wider reporting job.
Make the month-end check usable
A monthly reconciliation should let the owner trace each total back to its transactions:
- Export invoices, credit notes and refunds from billing.
- Group net sales and VAT by customer country and treatment.
- Match those totals to the ledger’s sales and VAT control accounts.
- Reconcile the Irish VAT and OSS return figures separately.
- Match gross collections, fees and settlement timing to processor reports and the bank.
Investigate the differences rather than posting a balancing entry to make the totals agree. Missing evidence, an incorrect tax code and a payout timing difference need different fixes.
Give the review an owner. Record who maintains the tax codes, who approves exceptions and who signs off the reconciliation. A monthly process that relies on everybody remembering the same rules will become harder to operate as transaction volumes grow.
The commercial result matters too. When a consumer price includes VAT, the tax rate affects what the business keeps before its costs. For example, at a fixed €123 price, 23% VAT leaves €100 net; 20% leaves €102.50. That €2.50 difference is a net-sales difference, not a profit forecast.
Connect VAT controls to the owner’s decisions
A software business needs dependable monthly numbers before deciding what it can spend. The bank may contain money reserved for tax, while subscriptions collected in advance may fund services still to be delivered. Our worked management accounts example shows how profit, cash and financial commitments connect.
At Around Finance, the starting point is a clear connection between billing, bookkeeping, tax and reporting. Our SaaS and technology accounting support explains how we work with growing businesses.
If that connection is missing and you need ongoing monthly support, a Finance Fit Call can establish the scope and whether working together makes sense.
FAQs
Is VAT on software always 23% in Ireland?
Ordinary domestic software supplies normally use the standard rate. For overseas sales, check the service, customer status and place-of-supply rules before selecting a code.
Does an EU business’s VAT number mean I can skip the checks?
No. Validate the number, establish the receiving customer’s status and location, and retain the invoice and supporting records. Resolve missing or conflicting information before relying on reverse charge.
Can I use OSS for all software sales?
No. Union OSS covers qualifying EU consumer transactions within the scheme. Domestic Irish services and ordinary reverse-charge B2B sales need their separate treatment and reporting.
What if my Irish business buys software from abroad?
This is the buyer’s reverse-charge question. An Irish business receiving relevant services from abroad may have to register and self-account even below domestic turnover thresholds. Revenue states that there is no registration threshold for received services.
For a €1,000 purchase subject to 23% Irish VAT, the self-accounted VAT is €230. Recovery depends on eligibility. A fully eligible deduction can offset that amount; an exempt business should not assume it can recover it.
Is a payment processor’s bank payout my software revenue?
No. Separate gross collections, VAT, refunds, fees and settlement timing. Then apply the appropriate revenue-recognition policy. The bank movement is one part of the reconciliation.
