INTERNAL NOTE from Financial Accounting, Meitheamh 2013
RE: TAXATION in NUIG
1.
VAT (Value Added Tax)
As a general principle, the University does not charge VAT on its income,
(known as ‘output’ VAT) the bulk of which is earned in the form of Fees and
State Grants. An exception occurs when the University invoices for
commercial services e.g. certain Contract Research services.
The University incurs VAT (known as ‘input’ VAT) on the vast majority of
goods and services it purchases, whether this VAT is levied by the supplier, or
“self assessed” by the University. The geographical location of the supplier
and the place where the supply occurs, are the principal determinants of
applicable VAT rates which must be captured at a transaction level in the
University’s accounting system – known as Agresso.
If an activity being carried out by the University is deemed ‘commercial’ then
‘output’ VAT must be charged on sales invoices issued to the relevant
customer. Correspondingly, ‘input’ VAT incurred on supplies DIRECTLY
ASSOCIATED with the commercial activity, may be reclaimed.
Different Agresso “Tax Codes” are used to record the different types of VAT
incurred by the University.
A)
Purchase of Goods or Services from suppliers based in Éire (26 counties).
If the supplier is registered for VAT in Éire, they will add it to their
invoice. Application of the correct tax code (P1, P2, P3, or P4) per
Appendix 1 to relevant documents is essential, and the tax code should be
provided by the purchaser, not by accounts office personnel.
B)
Purchase of Goods outside of Éire (26 counties), i.e. imports from another
EU country (i.e. Austria, Belgium, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Italy,
Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia,
Slovenia, Spain, Sweden and the United Kingdom).
The invoice from the supplier should not charge VAT, as it is an export for
them. Application of the correct tax code (U1, U2, U3, or U4 per
Appendix 1 attached) to relevant documents is essential, and the tax code
should be provided by the purchaser, not by accounts office personnel.
C)
Purchase of Goods from outside of Europe, i.e. imports from e.g. U.S.A.,
South Africa, Japan, China, South America, Australia etc.
The invoice from the supplier should not charge VAT as it is an export for
them. Application of the correct tax code (I1, I2, I3, or I4) per Appendix 1
to relevant documents is essential. This tax code should be provided by the
purchaser, not by accounts office personnel.
Note, if there are “add on” costs to delivering the goods referred to in B)
and C) above e.g. courier service, then those costs should be treated as part
of the cost of the goods themselves, and not as under D) below.
D)
Purchase of Services outside of Éire (26 counties), whether from Europe
or rest of the world. (examples of ‘Services’ are Audit, Architect,
Consultancy, Lecturing, Legal, Maintenance etc.)
VAT should not be charged by the “foreign” service provider, but the
University must account for it at the rate which would have applied, had
the service been “bought” in Éire. These are known as “4th Schedule
Services”.
Application of the correct tax code (F1, F2, F3, or F4) per Appendix 1 to
relevant documents is essential. This tax code should be provided by the
purchaser, not by accounts office personnel.
E)
Purchase of Construction Services both inside and outside the State.
The new VAT rules for Construction Services (Reverse Charge System)
applies to principal contractors (NUI, Galway) and sub-contractors
involved in construction operations to which Relevant Contracts Tax
(RCT) applies effective from 1st September 2008.
The invoice from the supplier should not charge VAT, and must contain
the statement “VAT ON THIS SUPPLY TO BE ACCOUNTED FOR
BY THE PRINCIPAL CONTRACTOR”. Application of the correct tax
code (T1, T2, T3, or T4) per Appendix 1 to relevant documents is
essential, and the tax code should be provided by the purchaser, not by
accounts office personnel.
Additional information on new VAT rules for Construction Services is
available on http://www.revenue.ie.
2.
A)
P.S.W.T. (Professional Services Withholding Tax) 20%
Most publicly funded organisations (such as this University) must deduct tax
at the standard rate from the majority of payments to providers of
“Professional Services” such as audit, accounting, architectural, consulting,
legal, etc. Currently, the standard rate of tax is 20%. This is applied to the preVAT invoice amount, including expenses, if applicable.
The only services exempt from P.S.W.T. are:a) (I)
(II)
(III)
(IV)
(V)
(VI)
Teaching, training and lecturing services
Translation services
Proof reading services
Stenographic services
Exam setting services
Contract cleaning and similar “maintenance” services
b) If the University is paying a professional service invoice ON BEHALF of
a third party, e.g. on behalf of a campus company.
Note that P.S.W.T. applies to overseas suppliers of such services so that an invoice
for, say, legal professional services from a US-based lawyer would incur P.S.W.T.
Application of the correct tax code (W0, WI or W2) per Appendix 1 to relevant
documents is essential. This tax code should be provided by the purchaser, not by
accounts office personnel.
B)
3.
The University also “suffers” P.S.W.T. on invoices it raises on other publicly
funded organisations e.g. health boards.
PAYE / Income Tax and PRSI
All regular, full time, part time, contract and casual staff are established on the payroll
system and payments for work done are taxed and P.R.S.I.’d in accordance with
government regulations.
“Occasional” payments for work done, should ideally be processed as per 1A, 1D or
2 above, i.e. the person to whom the occasional payment is to be made, should
provide the University with an invoice. This assumes that the person performing the
work is SELF EMPLOYED. A code of practice has been published to assist in the
determination of the employment status of persons performing occasional work and
may be viewed as the appendix to http://www.revenue.ie/doc/sp_it104.doc
Invoices issued by self employed persons must be constituted in accordance with
Revenue rules available at http://www.revenue.ie/doc/si723_03.doc
4.
Relevant Contracts Tax (Dealt with in Accounts Payable and applies only to
purchase of building type “construction” services.)
The University is deemed to be the “principal contractor” in buying building
(construction) services from “sub contractors”.
We must deduct tax at 35% from payments to subcontractors, unless we have applied
for, and have been provided with a “relevant payments card” (RCT 47) for the
relevant sub contractor. In order for us to apply for an RCT 47, we must have sight of
a valid C2 (tax clearance type credit card) for the particular sub contractor. We must
maintain a record of all payments to all (construction) sub contractors, regardless of
whether we hold an RCT 47 for them. A monthly return (RCT 30) and an annual
return (RCT 35) must be made to the Revenue Commissioners detailing and paying
over any RCT deducted by the University.
5.
Tax Clearance
If the University pays €10,000 or more (including VAT) in any twelve month period
to providers of goods or services, (other than employees) based either in Eire or
overseas (abroad), we should hold an up to date Tax Clearance Certificate from them.
An exception to this is a subcontractor who produces a valid C2 (sub contractor’s
certificate) as described in 4 above. These regulations apply to the vast majority of
suppliers paid (regularly) by Accounts Payable, and the set up details for such
suppliers in the accounts payable system provides for the recording and reporting of
the Tax Clearance expiry date.
If in doubt, you should always request a copy of the supplier’s Tax Clearance
Certificate. The fact that they have an up to date Tax Clearance Certificate means that
they are known to the Revenue Commissioners, and that their tax affairs are in order.
Note that it is the PAYMENT date that is relevant in applying the rules. If a supplier’s
tax clearance certificate expired on say 31st of January, and we are processing a
payment on 1st of February, in payment of January invoices, we could not release the
payment until the certificate was renewed by Revenue.
The University itself must provide its Tax Clearance Certificate to organisations
paying over monies to it e.g. health boards and providers of research funding.
Additional information on Tax Clearance is available on http://www.revenue.ie under
Leaflets & Guides and also on http://www.revenue.ie/services/foi/s16_2001/taxclr.pdf
6.
Benefit in Kind Legislation
BIKs are benefits provided by employers to their employees which are deemed by the
Revenue authorities to be another form of pay/remuneration. Up to 31/12/2003, the
onus was on the employee to declare such benefits, and pay tax as appropriate. From
1/1/2004, the onus is on the employer, to operate PAYE and PRSI (Employee and
Employer) on such benefits.
A full list of BIKs may be viewed at http://www.revenue.ie/pdf/BIK_Intro.pdf
but the principal one affecting employees of the university is fee concessions, granted
to children and spouses of staff.
The taxation (and PRSI) aspects of these benefits are administered in the relevant
employee’s payroll record, on the University’s payroll system.
Stiúrthóir Cuntasaíochta Airgeadais
Meitheamh 2013
Appendix I – Tax Codes
Agresso VAT CODES
P1
P2
U1
U2
I1
I2
F1
F2
T1
T2
Low Rate in Éire
Standard Rate in Éire
Low Rate in Europe (excl. Éire)
Standard Rate in Europe (excl. Éire)
Low Rate in Rest of the World
Standard Rate in Rest of the World
Low Rate in Rest of the World
Standard Rate in Rest of the World
Low Rate Construction Services
Standard Rate Construction Services
P3
P4
U3
U4
I3
I4
F3
F4
T3
T4
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
If Vatable Research
Purchase Cost Incurred By
Department or Non
VATable Research
Note 1
A)
B)
C)
D)
E)
P1 or P2
U1 or U2
I1 or I2
F1 or F2
T1 or T2
VATable Research
P3 or P4
U3 or U4
I3 or I4
F3 or F4
T3 or T4
P.S.W.T. CODES
WO
W1
W2
Code to be used on an invoice where no VAT has been charged
Code to be used on an invoice where VAT has been charged at the lower
rate (currently 13.5%)
Code to be used on an invoice where VAT has been charged at the
standard rate (currently 23%)