VAT is one of the most confusing aspects of running a trades business in Ireland. Different rates for different services, the two-thirds rule, reverse charge VAT — it's enough to make your head spin. This guide explains it in plain English.

The Three VAT Rates You'll Use

As a tradesperson, you'll mainly deal with three rates:

13.5% — The Reduced Rate

This is the rate most tradespeople charge most of the time. It applies to:

Construction services (building, renovating, extending)
Plumbing, electrical, and heating work
Plastering, painting, decorating
Roofing, tiling, flooring
Kitchen and bathroom fitting
Any work on "immovable property" (attached to land or buildings)

23% — The Standard Rate

This applies to:

Supply of goods only (selling materials without fitting)
Professional/consultancy services (design, surveying)
Equipment hire
Services not connected to immovable property

0% — Zero Rate

Rare for most tradespeople, but applies to certain exports and specific exempt supplies.

The Two-Thirds Rule

Here's where it gets interesting. If you supply both goods (materials) and services (labour) together, and the goods make up more than two-thirds of the total value, you must charge 23% VAT on the entire invoice.

Example: You fit a new boiler. The boiler costs €2,000 and your labour is €500. The goods are 80% of the total — more than two-thirds. You charge 23% on everything.

Alternative approach: Issue two invoices — one for the boiler (23% VAT), one for installation (13.5% VAT). More paperwork, but can save your customer money.

Do You Need to Register for VAT?

You must register for VAT if your turnover exceeds:

€37,500 for services (most trade work)
€75,000 for goods (if you're mainly selling products)

These are annual thresholds. If you're approaching them, register before you exceed — not after.

Should You Register Voluntarily?

You can register even below the threshold. Benefits include:

Reclaim VAT on materials, tools, van costs, etc.
Appear more professional to business customers
Required for some commercial contracts

Downsides: more paperwork, your prices effectively increase for residential customers by 13.5%.

What Must Be on a VAT Invoice?

A valid VAT invoice must include:

Your business name and address
Your VAT registration number
Customer's name and address
Sequential invoice number
Date of issue
Description of goods/services
Quantity and unit price (excluding VAT)
VAT rate(s) applied
Total VAT amount
Total amount including VAT

VAT Returns and Payment

Most small businesses file VAT returns every two months. You'll pay VAT on your sales (output VAT) minus VAT on your purchases (input VAT).

Keep good records. You need to store invoices for six years. Using invoice software makes this automatic — every invoice is saved and searchable.

Common Mistakes to Avoid

Wrong rate: Charging 23% when 13.5% applies (or vice versa)
Missing details: Invoices without VAT number or breakdown
Not understanding two-thirds rule: Can lead to under/over charging
Late registration: Revenue can backdate and charge penalties

Simplify with Software

Good invoice software like TradeTime has Irish VAT rates built in. Select your service type, and the correct rate applies automatically. No more guessing or googling "what VAT rate for bathroom tiling."

VAT for Irish Tradespeople: What You Need to Know