🇮🇪 Ireland cuts VAT rate from 23% to 21%

Due to the COVID-19 crisis, Ireland announced that the domestic VAT rate will be cut from 23 to 21 percent from September 1, 2020 to February 28, 2021. Learn how Octobat is handling this update.

On August, Ireland has announced a COVID-19 package including a cut in the standard VAT rate from 23% to 21%, for a period of 6 months, starting from the 1st of September, ending on the 28th of February, 2021.

Octobat customers selling from and to Ireland are impacted by this change as the tax rate cut must be reflected in their transactions. Here is our plan to help you to automate this migration depending on your case.

Octobat's automation solutions

If you are using the "specific tax rate" feature in Octobat, please refer to the next paragraph

One-off charges and new subscriptions

Octobat has already implemented the new standard (21%) VAT rate so that calculations performed from September 1st will be automatically bound to the new percentages.

That means that every time our algorithm detects that Irish VAT should be applied for a given transaction or sub-item, the new percentages will be applied, no matter if the resulting billing scheme is tax-inclusive or tax-exclusive.

These updates will ensure an automated, hassle-free, and perfectly compliant solution for businesses using:

• Beanie

• Direct integrations

• The Tax Calculation APIs (Tax Evidences)

• The Octobat Dashboard

Existing subscriptions, renewals and trial-endings

If you have existing subscriptions on Stripe, depending on how they are set up, Octobat may update them on your behalf in order to make sure that new tax rates are applied. Below are the different cases you may encounter, and why you have basically nothing to do on your own. We're here to help:

Tax-inclusive automatic subscriptions

If you never used the Stripe TaxRate APIs, you probably rely on Octobat to calculate tax accordingly every time a transaction occurs. The Stripe Plan's price is always the final price paid by the customer, as it's per definition, tax-inclusive. Octobat does not have to perform any update in that case, as tax is calculated on a post-payment basis.

Before September 1st, here is what happens, for a €100 recurring plan:

Plan Amount	Charged Amount	Calculated VAT rate	Revenue	VAT
€ 100	€100	🇨🇮23%	€81,30	€18,70

And starting on September 1st, here is what will happen, for the same €100 recurring plan:

Plan Amount	Charged Amount	CaclulatedVAT rate	Revenue	VAT
€ 100	€100	🇨🇮21%	€82,64	€17,36

Octobat will never update your plans nor tweak your subscriptions. If you want to decrease your prices due to the VAT cuts, you need to create new plans and subscribe to your customers on your own.

Tax-inclusive subscriptions with the Tax Rates API:

In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations. Octobat will listen for renewals, and updates the subscription accordingly, using a 21% tax rate. The final price paid by the customer won't change, but this ensures that the invoices we generate are reflecting the tax rate cuts.

The change will be performed only on renewal. We are listening to the Stripe invoice.created event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.

Before September 1st, here is what happens, for a €100 recurring plan:

Plan Amount	VAT rate	Charged Amount	Revenue	VAT
€ 100	23% (inclusive)	€ 100	€81,30	€18,70

And starting on September 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:

Plan Amount	VAT rate	Charged Amount	Revenue	VAT
€ 100	21% (inclusive)	€ 100	€82,64	€17,36

Tax-exclusive subscriptions with the Tax Rates API:

In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations, so the customer is paying the right plan amount + VAT on a recurring basis. Octobat will listen for renewals, and updates the subscription accordingly, using a 21% tax rate. In that case, the final price paid by the customer will change.

The change will be performed only on renewal. We are listening to the Stripe invoice.created event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.

Customers using Beanie in tax-exclusive mode are also concerned by this change.

Before July 1st, here is what happens, for a €100 recurring plan:

Plan Amount	VAT rate	Charged Amount	Revenue	VAT
€ 100	23% (exclusive)	€123	€100	€23

And starting on July 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:

Plan Amount	VAT rate	Charged Amount	Revenue	VAT
€ 100	21% (exclusive)	€121	€100	€21

Particular cases: Specific tax rate and hard-coded API rates

Businesses using the specific tax rate setting in Octobat in order to reflect the Irish 21% VAT rate for every transaction must update this setting in the Configuration > Taxes > Tax Settings as follows: (Specific tax rate must be changed from 23% to 21%).

API users that do not use the Tax Evidence API endpoint, but rather hardcode the tax percentage (applied_rate parameter) when creating items must also update their code accordingly.

February 28th, 2021 planned reversal

The boost measure is scheduled to end on Feb. 28th, 2021, resulting in VAT rates getting back to their pre-September 1st percentages. Octobat has already implemented the scheduled updates and will monitor closely the situation if any update or delay should occur.