A new regime for businesses to account for VAT on imports of goods into Ireland from non-EU countries came into effect on 1 January 2021. The new regime, known as postponed import VAT accounting (PIVA), is a welcome cashflow saving measure. However, it will be important for businesses to carefully implement the new requirements, as liabilities could arise in respect of any errors. In this article we address some of the key questions around what the new regime means for businesses.

What is PIVA?

PIVA is a new method for Irish VAT registered businesses to account for VAT on imports of goods into Ireland from outside of the EU. Typically, import VAT is payable at the time the goods are imported into and cleared for free circulation in Ireland or in certain cases is deferred until the following month. However, applying PIVA will allow businesses to self-account for import VAT in their VAT returns, thereby avoiding having to pay over at the point of import. The use of PIVA is optional.

What imports can PIVA apply to?

Although the introduction of PIVA coincides with the end of the Brexit transition period, its application is not limited only to imports from Great Britain. PIVA can be applied to imports of goods from all other non-EU jurisdictions. Goods coming into Ireland from Northern Ireland will continue to follow intra-Community VAT rules and therefore do not come within PIVA.

Who can operate PIVA?

All businesses that were registered for Irish VAT and Customs & Excise on 31 December 2020 were given automatic entitlement to PIVA. Going forward, all new intra-EU Irish VAT registration applicants will automatically be considered for PIVA where the applicant already has a current customs and excise (C&E) registration. Where an applicant is seeking a domestic-only Irish VAT registration they will need to apply for PIVA by written request to Revenue, providing supporting documentation. A VAT registered person must be in compliance with its tax obligations to operate PIVA and Revenue may exclude traders from operating PIVA where they deem it necessary.

How does a business operate PIVA?

VAT registered businesses wishing to apply PIVA will need to ensure their customs agent includes the appropriate codes on the import declaration filed at the time the goods are imported. Further details on the exact codes to be used are contained in guidelines on the Revenue website.

The business will then need to ensure the correct VAT entries are made in their VAT return. The VAT return has been updated to include an additional box, PA1, into which the total customs value of the goods imported under PIVA in the bi-monthly period must be inserted. The import VAT (calculated at the appropriate rate) should then be included in Box T1 of the VAT return and the corresponding VAT deduction included in Box T2 (subject to usual VAT deductibility rules).

The VAT Return of Trading Details has also been updated to include additional boxes, PA2, PA3 and PA4, to capture the value of the goods imported under PIVA.

What are the potential challenges to operating PIVA?

Businesses wishing to apply PIVA will need to ensure their systems and processes capture the correct import value in order to correctly report the imports in their VAT returns. As noted above, the value on which import VAT arises includes freight, insurance and any customs duties payable and might therefore be different to the invoice value payable to the relevant supplier.

In addition, if the VAT accounting is not correctly operated in the business’s VAT return, then import VAT is deemed to have been due and payable at the time of import. This could result in liabilities and associated interest and penalties.

David Duffy

FCA, AITI

Chartered Tax Advisor,

Indirect Tax Partner at KPMG