What VAT is
VAT stands for Value-Added Tax. It is a tax on goods and services. A VAT-registered business charges VAT to customers on taxable sales and pays the VAT collected to Revenue after deducting VAT it can reclaim on business purchases.
For sole traders, VAT registration does not change how your income tax is calculated. It changes how you invoice, price, record purchases, and file VAT returns.
Source: Revenue.ie - what is VAT?
VAT thresholds in 2026
Revenue guidance says VAT registration is required when taxable turnover goes over the relevant threshold. The threshold depends on what is sold.
| Business type | VAT threshold |
|---|---|
| Services | €42,500 |
| Goods | €85,000 |
| Mail-order or distance sales into Ireland | €10,000 EU-wide threshold rules may apply |
Source: Revenue.ie - VAT thresholds
What changes when you register?
| Before VAT registration | After VAT registration |
|---|---|
| You usually invoice without VAT. | You charge VAT on taxable sales at the correct rate. |
| You cannot usually reclaim VAT on purchases. | You can usually reclaim VAT on eligible business purchases. |
| No VAT returns are due. | You file VAT returns and pay Revenue the net VAT due. |
The standard VAT rate in Ireland is 23%, but reduced rates and exemptions can apply depending on what you sell. Do not assume your service is standard-rated without checking.
Simple VAT example
You invoice a business client €1,000 plus VAT at 23%. The customer pays €1,230. The extra €230 is VAT you collected for Revenue, not extra profit.
If you also paid €46 VAT on eligible business software in the same period, your VAT return may offset that purchase VAT against the VAT you collected.
| VAT calculation | Amount |
|---|---|
| VAT collected on sale | €230 |
| Less VAT reclaimable on purchase | €46 |
| Net VAT payable | €184 |
How to register for VAT
Sole traders can register for VAT through Revenue's online services where eligible. If online registration is not available, Revenue uses registration forms such as TR1 for individuals. Revenue guidance links VAT registration with reaching the relevant threshold, rather than delaying until months afterwards.
Voluntary registration can be possible before you hit a threshold, but it can add admin and affect pricing for non-business customers. It is worth getting advice before registering voluntarily.
What this means in real life
For a sole trader, VAT registration changes how sales and purchases are recorded. VAT charged to a customer is collected for Revenue rather than treated as ordinary business income, while qualifying VAT on business purchases may be reclaimable under the rules. A customer invoice can therefore show a higher total even though the VAT portion is not part of the trader's profit. Registration also creates filing, invoicing and record-keeping duties. The turnover threshold depends on the type of supplies, and voluntary registration can have different practical consequences from compulsory registration. VAT is separate from the income tax, USC and PRSI charged on business profit. The sole trader tax guide explains those taxes, while Revenue guidance confirms the current VAT treatment for particular goods or services.