Make sure your vat status works to your advantage
If you qualify as a 'flat-rate' farmer, you should consider the implications of claiming tax back
The rate of VAT that applies to most agricultural produce is either 0pc or 4.8pc, compared to the standard rate of 21pc for the majority of other goods. This should, in theory, make farm sales as competitive as possible from a VAT point of view.
Another benefit of the Irish VAT system for farmers is that those who qualify as farmers in the eyes of the Revenue are not required under Irish VAT legislation to register and account for VAT on their sales. Such farmers are known as 'flat-rate' farmers.
It is important to note that if other 'vatable' activities are being carried out by the same person, they may not qualify as a farmer for VAT purposes and they may be required to register and account for VAT on all of their activities.
Farmers that are not required to register for VAT are also restricted with regard to reclaiming VAT incurred on farm purchases.
To compensate these farmers for this, a flat-rate addition, currently 5.2pc is added to the price of produce sold to a VAT-registered person.
For example, Jack is a flat-rate farmer and sells his cattle at auction for €1,000. He is entitled to receive an additional €52 from his customer, in respect of the flat-rate addition.
A flat-rate farmer may be required to register for VAT in regard to intra-EU acquisitions or the receipt of certain services from outside the State.
Should farmers register for VAT?