You’ve built your business from the ground up, and now you’re hitting significant revenue milestones. That’s fantastic! But with growth comes new responsibilities, and understanding the VAT threshold in Ireland is one of them.
This guide breaks down everything you need to know about VAT thresholds in Ireland. Whether you’re running an e-commerce business, managing a retail shop, or providing professional services, you’ll find practical, actionable information to help you make informed decisions about VAT registration.

What is VAT and Why Does it Matter?
Value Added Tax (VAT) is a consumption tax that applies to most goods and services in Ireland. As a business owner, you act as a tax collector for Revenue, charging VAT on your sales and paying it to the government, while also having the ability to reclaim VAT on your business purchases.
How VAT works in Ireland:
- Businesses charge VAT on their sales (output VAT)
- They can reclaim VAT on their purchases (input VAT)
- The difference is paid to Revenue
The role of VAT in the Irish economy is significant – it’s one of the government’s main sources of tax revenue.
Current VAT rates in Ireland:
- 23% – Standard rate (most goods and services)
- 13.5% – Reduced rate (building services, some food items)
- 9% – Special rate (newspapers, sporting facilities)
- 0% – Zero rate (certain foods, children’s clothes)
- Exempt – (financial services, medical care)
Understanding VAT Thresholds in Ireland
The VAT registration threshold in Ireland operates on a two-tier system:
- €85,000 for businesses primarily selling goods
- €42,500 for businesses providing services
These thresholds were established to protect small businesses from excessive administrative burdens while ensuring fair competition in the marketplace.
Historical Context and Future Outlook
The VAT threshold in Ireland has seen significant changes over the years. Here’s how the thresholds have evolved:
Historical changes:
- Pre-2023: €75,000 (goods) / €37,500 (services)
- 2023-2024: €77,000 (goods) / €39,000 (services)
- 2025: €85,000 (goods) / €42,500 (services)
These increases reflect the government’s recognition of inflation and rising business costs. For small business accounting planning, it’s important to note these changes.
Looking ahead, several factors might influence future VAT thresholds:
- EU VAT reforms and harmonization efforts
- Digital economy growth
- Post-Brexit trade adaptations
- Inflation and economic conditions
Monitoring Your VAT Position
To stay compliant with VAT regulations, you need to:
- Track Your Rolling Turnover:
- Monitor revenue daily/weekly
- Use accounting software for real-time tracking
- Set up alerts when approaching thresholds
- Keep Detailed Records:
- Sales invoices and receipts
- Revenue by category (goods vs services)
- EU and international sales separately
- Regular Review Periods:
- Monthly revenue checks
- Quarterly threshold assessments
- Annual planning and forecasting
When Must You Register for VAT?
You must monitor your turnover on a rolling 12-month basis. This means looking back over the previous 12 months at any given time, not just the calendar year. With the new 2025 thresholds, you must register when:
- Your goods sales exceed or will likely exceed €85,000
- Your services revenue exceeds or will likely exceed €42,500
- You receive certain services from abroad
- You supply certain services to businesses in other EU countries
For detailed registration steps, check our guide on how to get a VAT number in Ireland.
Consequences of Non-Registration
Failing to register for VAT when required can result in:
Immediate Consequences:
- Backdated VAT payments
- Interest charges (8% per annum)
- Penalties up to 100% of VAT due
- Publication in defaulters list
Long-term Impact:
- Damaged business reputation
- Difficulty with future tax compliance
- Problems securing business contracts
- Restricted access to government contracts
Benefits and Challenges of VAT Registration
Advantages of Being VAT Registered
Input VAT Recovery:
- Claim back VAT on business purchases
- Reduce your effective costs
- Improve cash flow management
Business Credibility:
- Professional appearance to other businesses
- Easier participation in B2B transactions
- Access to larger contracts and tenders
Growth Opportunities:
- No turnover limitations
- Competitive pricing options
- International trade capabilities
Potential Drawbacks
Administrative Requirements:
- Regular VAT returns
- Detailed record-keeping
- Compliance obligations
Cash Flow Impact:
- VAT payments timing
- Working capital considerations
- Payment scheduling
Competition Factors:
- Pricing adjustments needed
- Market positioning changes
- Customer price sensitivity

Voluntary VAT Registration
Even if you’re below the VAT threshold (€85,000 for goods or €42,500 for services), registering voluntarily might benefit your business. Here’s when to consider early registration:
Strategic Benefits:
- Build credibility with larger clients
- Reclaim VAT on major purchases
- Prepare for growth phases
Business-Type Considerations:
Startups:
- High initial investment costs? Claim back VAT on equipment and setup costs. This can be a major advantage for startups, as you can elect to register for VAT even if you don’t yet meet the threshold. This allows you to reclaim the VAT on those significant upfront expenses, providing a crucial cash flow boost early on. Examples of such expenses include:
- Restaurant fit-out and equipment
- Retail store setup and inventory
- Manufacturing machinery and production setup
- Expecting rapid growth? Get ahead of mandatory registration
- B2B focus? Meet client expectations for VAT registration
E-commerce Businesses:
- Multiple platform selling
- International expansion plans
- Marketplace requirements
- Distance selling considerations
B2B Service Providers:
- Client expectations
- Industry standards
- Professional image
- Cross-border service provisions
Making the Decision
Consider voluntary registration if:
- You have significant business expenses with VAT
- Your customers are mainly VAT-registered businesses
- You plan to expand internationally
- Your competitors are VAT registered
- You’re investing heavily in business growth
VAT Registration Process
Getting your VAT registration right from the start saves time and prevents future headaches. Here’s what you need to know:
Step-by-Step Guide:
- Gather necessary documentation
- Choose registration date
- Complete TR2 form
- Submit through ROS
- Await VAT number
Required Documentation:
- Business registration details
- Bank statements showing business transactions
- Projected turnover figures with supporting evidence
- Lease agreements (if applicable)
- Contracts or orders showing expected income
Timeline and Expectations:
- Standard processing: 5-10 working days
- Online applications through ROS preferred
- Registration certificate issuance
- VAT number format explained
Common Pitfalls to Avoid:
- Incomplete documentation
- Incorrect turnover calculations
- Missing deadlines
- Wrong VAT rates selection
Managing VAT After Registration
Successful VAT management requires good systems and regular attention. Using Xero or similar accounting software can help streamline these processes:
VAT Returns:
- Bi-monthly filing standard (January/February, March/April, etc.)
- Annual Return of Trading Details (RTD)
- Payment deadlines (19th of the month following the VAT period)
Record-Keeping Requirements:
- Sales invoices and credit notes
- Purchase invoices and expenses
- Bank statements and financial records
- Stock records and movements
- Asset purchases and disposals
- Digital copies of all documents
VAT Compliance Calendar
Key Dates and Deadlines:
- 19th – Bi-monthly VAT return and payment due
- 23rd – Extended deadline for ROS online payments
- January – Review annual VAT position
- June – Mid-year compliance check
- December – Year-end VAT adjustment review
- VAT ROTD due annual 23rd January i.e. one month after financial year-end
Special VAT Considerations for E-commerce
E-commerce businesses face unique VAT challenges.
Distance Selling Rules:
- EU threshold of €10,000 for cross-border B2C sales
- One-Stop Shop (OSS) registration options
- Country-specific compliance requirements
Digital Services:
- Place of supply rules
- VAT MOSS considerations
- Customer location tracking
- Digital evidence requirements
Marketplace Obligations:
- Platform facilitator responsibilities
- Reporting requirements
- Documentation needs
VAT Compliance Best Practices
Stay compliant and minimize stress with these best practices, especially important with the new 2025 thresholds:
Record-Keeping Systems:
- Digital storage solutions
- Regular backups
- Audit trail maintenance
- Integration with accounting software
Regular Monitoring:
- Monthly reviews of turnover levels
- Threshold tracking against €85,000/€42,500 limits
- Cash flow planning for VAT payments
Working with Professionals:
- Regular accountant meetings
- Compliance reviews
- Strategic planning sessions
Industry-Specific VAT Considerations
Different sectors have unique VAT requirements. For small business accounting, consider these sector-specific needs:
Retail:
- Point-of-sale systems integration
- Mixed-rate products management
- Special schemes availability
- Stock management implications
Digital Services:
- Cross-border supplies
- Electronic evidence requirements
- Platform responsibilities
- International client management
Creative Agencies:
- Mixed supplies handling
- International clients
- Project-based billing
- Intellectual property considerations
VAT Planning and Strategy
Smart VAT planning supports business growth and compliance with 2025’s higher thresholds:
Cash Flow Management:
- Payment timing strategies
- Credit control systems
- VAT reserve planning
- Working capital management
Pricing Strategies:
- Competitive positioning
- Margin protection methods
- Market analysis techniques
- Customer impact assessment
Growth Planning:
- Threshold monitoring (€85,000/€42,500)
- Registration timing optimization
- System scaling preparation
- International expansion planning
Conclusion
Understanding and managing your VAT obligations is crucial for business success. With the new 2025 thresholds of €85,000 for goods and €42,500 for services, staying informed and prepared is more important than ever.
Key Actions:
- Track your turnover regularly against current thresholds
- Plan strategically for registration timing
- Set up proper systems before reaching thresholds
- Stay informed about VAT changes and updates
Remember, VAT compliance doesn’t have to be overwhelming. With proper planning and support, you can turn it into a manageable part of your business operations. Contact us today for a free consultation about your VAT position and obligations. Our team will help you make informed decisions that support your business growth while ensuring full compliance.
FAQs
What happens if I go over the new VAT threshold?
You must register within 30 days of exceeding €85,000 for goods or €42,500 for services.
Can I register voluntarily before reaching the threshold?
Yes, if it makes business sense for your situation, particularly for B2B businesses.
How do I calculate my turnover for VAT purposes?
Include all taxable sales over a rolling 12-month period, excluding VAT-exempt sales.
What happens if I register late?
You may face penalties and need to pay VAT retrospectively, plus interest at 8% per annum.
How often do I need to file VAT returns?
Usually bi-monthly, but options exist for different filing frequencies based on your business size and type.
Do the new 2025 thresholds apply immediately to my business?
Yes, the new thresholds of €85,000 for goods and €42,500 for services apply to all businesses from January 2025.