Today, Revenue published e-Brief 45/22. In it, the Irish Revenue Commissioners updated their guidance material in relation to the operation of the Section 56 authorisation regime to provide further clarity in relation to qualifying persons, imports as well as the cancellation of authorisations.
The section 56 authorisation enables the holder of such to receives supplies of goods and services in Ireland at the 0% rate of VAT. This is known as a ‘56B’ authorisation.
Broadly speaking, a VAT registered entity is eligible to apply for a Section 56 authorisation where over 75% of their annual turnover is derived from qualifying sales including intra-community supplies of goods, exports and certain contract work.
The definition of a “qualifying person” is an accountable person whose turnover from zero-rated intra-Community supplies of goods, export of goods outside the EU and supplies of certain contract work equates to 75% or more of their total annual turnover for the twelve month period preceding the making of an application for Section 56 authorisation. (Section 52 FA 2021 amended the definition of “qualifying person” in section 56 VATCA 2010).
Start Up Situations
Previously, a person could only apply for a section 56 authorisation where they could demonstrate that they qualified for one in the twelve month period prior to making the application. The updated Guidance material now includes an exception to this requirement for start-up entities, on an interim basis, provided certain criteria are met:
their turnover from zero-rated intra-Community supplies of goods, exports and certain supplies of contract work will exceed 75% of their total turnover in the first twelve months of trading
they satisfy all other conditions as set out under Section 56 and
the start up entity is a subsidiary of, or is otherwise connected to a company that is in possession of a current Section 56 authorisation.
The third condition will cause difficulties for many start-up companies, since in many cases they are new individual companies with no related entities. As such, it would appear the start-up would be required to wait the full twelve months before making a VAT56B application.
Renewals of existing Authorisations
e-Brief 45/22 confirms that for renewals of existing valid authorisations, the turnover figure, from audited financial statements for an accounting year end falling within the twelve month period preceding the application, may be used.
Interaction with postponed VAT accounting arrangements
As Section 56 Authorisation allows the importation of goods at 0% VAT rate, the holder of a section 56 authorisation is, therefore, not permitted to use postponed accounting arrangements.
Cancellation of an Authorisation
The cancellation of a VAT56B arises where Revenue is not satisfied that there is a continuing entitlement to such authorisation.
Revenue will cancel the authorisation, by notice in writing, in circumstances where:
the authorised person is no longer a qualifying person
the information provided, or the declarations made when applying for the authorisation were proven to be materially false, incorrect, or misleading
the authorised person fails to comply with the “Post authorisation obligations” outlined.
Where the authorisation is cancelled, a formal written notice will be issued to the accountable person outlining the grounds for cancellation.
Revenue can request documentation and proof from the accountable person in circumstances where it has reservations regarding the entitlement of that person to a Section 56 Authorisation.
The cancellation may be appealed to the Tax Appeals Commission.
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