Ireland Shifts to Bi-Monthly VAT Filing

With effect from August 2025, the Value-Added Tax (VAT) payment and reporting system will undergo a significant change, according to the Irish Revenue Commissioners. With the introduction of the Variable Direct Debit (VDD) scheme and the phase-out of the Fixed Direct Debit (FDD) scheme, this reform represents a significant milestone in Revenue’s larger modernisation effort. Due to the modification, many micro and small firms will now file their VAT returns on a bi-monthly basis instead of annually.

Variable Direct Debit (VDD) Transition

The VDD model shift aims to increase efficiency for both the authority and enterprises by bringing Revenue’s collection procedure into compliance with contemporary banking norms. Taxpayers made estimated fixed monthly payments under the former FDD system, with a balancing payment due at the end of the year.

The exact amount owed for each period is collected automatically by the VDD program. To ensure correct and timely payments, Revenue will now directly debit the outstanding VAT balance on or around the third last working day of the month. Financial predictability is increased, and the risk of late payment interest is greatly decreased by this automation.

Crucially, prior eligibility restrictions are eliminated with the VDD option. Direct debit has made it easier for all VAT-registered firms, regardless of size, to participate.

Change to Bi-Monthly VAT Filing Is Required

The frequency of VAT filings for businesses switching from the FDD to the VDD scheme will also shift from annual to bi-monthly. This change facilitates improved cash flow management and enables companies to obtain VAT credits (refunds) sooner rather than later in the year.

The first of January, March, May, July, September, and November mark the start of the bi-monthly VAT periods. The 19th day of the month after the conclusion of each taxable period is the usual date for filing and payment. The deadline has been extended to the 23rd day for those who file electronically using the Revenue Online Service (ROS).

For smaller firms that reach certain requirements, Revenue will continue to offer lower filing frequencies; nevertheless, the bi-monthly VAT 3 return will still be the normal standard.

More Comprehensive VAT Updates for 2025

1. Higher thresholds for VAT registration

The turnover criteria for required VAT registration have been raised to €42,500 for services (up from €40,000) and €85,000 for products (up from €80,000) as of January 1, 2025. To make compliance easier for smaller dealers, this modification takes inflation into account.

2. VAT Adjustments for Energy and Heat Pumps

To counteract pressures from rising energy costs, the interim 9% VAT rate on gas and electricity is extended until April 30, 2025. In keeping with Ireland’s climate goals and encouraging energy efficiency, the VAT rate on the delivery and installation of heat pumps will also be lowered from 23% to 9% as of January 1, 2025.

3. The EU VAT SME Program

The new EU VAT Small and Medium Enterprise (SME) plan streamlines cross-border trading and goes into effect on January 1, 2025. Qualifying traders may now be free from VAT registration in other participating EU countries if their EU-wide turnover is less than €100,000 (and below domestic limits). The goal of the proposal is to promote company expansion throughout the EU single market and reduce red tape.

Summary

Irish Revenue is taking a bold step toward transparency and digitisation with these upgrades. Businesses’ tax management practices will be modernised with the implementation of the VDD system and bi-monthly VAT filing, which will enhance compliance and lessen administrative burdens. 2025 will be a year of transition for the majority of organisations, one that rewards proper financial preparation and proactive adaptation.

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