Taxi Drivers in Ireland could be unknowinly walking into a tax headache and issues renewing their license. In this blog post, we will go through what the issue is and how it can be easily be prevented.
New Entrants
In the past number of years there have been new entrants into the Irish taxi booking platform marke. Most notably, Uber has become a very popular means to getting new customers. However, there is one slight difference in the what Taxi Drivers are required to do when doing business with Uber versus more established market patricipants such as Free Now… and that is how VAT is charged and collected.
The VAT rules for Taxi Drivers in Ireland
The provision of taxi services in Ireland is VAT exempt, which means that taxi drivers do not charge any VAT on the services they provide to their passengers. The consequence of providing a VAT exempt service in Ireland is that you cannot reclaim any VAT on any business expenses you mmay incur when carrying out your VAT exempt trade.
Reverse Charges
The crux of the issue of working with Uber is that because their company is based outside of Ireland you are essentially importing a service into Ireland. When Uber issues an invoice for its booking fees to the Taxi Driver, it will include a line down at the bottom of the invoice noting that a ‘Reverse Charge Applies’.
In practice, what this means is the responsibility for paying the VAT reverts from the seller (Uber) to the customer (Taxi Driver). This is very common for cross border B2B sales, the place of supply in these situations is always where the customer is based… in this case Ireland.. so Irish VAT applies.
Therefore the taxi driver must register for VAT and there is no registration threshold applicable – even if its just a couple of hundred euro, you still need to register.
Providers like Free Now have however been helpful and are collecting the VAT on behlaf of taxi drivers and are passing it over to Revenue. The most important thing you can do is, check the invoices of each provider you work with, and see are they charging Irish VAT or is there a reverse charge shifting the obligation to you.
Practical Example
Revenue have provided some practical examples you can take a look through to see how the VAT is calculated. Its a very simple calculation, you just need to multiply your booking fee services received by 23% that will be the figure included in your next VAT return.
The implications of not doing this could be costly. If you are investigated bby Revenue, you’ll have to pay over any outstanding taxes due, plus late fees and interest on top of that. The biggest knock on effect could be that it disrupts your business, a key part of renewing your taxi license is getting tax clearance, and any issues of non-compliance with Revenue could lead to this tax clearance being rescinded.
Need Help?
If you are not sure about how to get things right or want to chat about your situation, you can always connect with us for a chat hello@irishfinancial.ie.
Disclaimer: this blog post is for informational and educational purposes only and should nto be construed as financial advice.