Ireland: Uber Drivers May Be Liable for VAT on Commissions

September 17, 2024

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Uber drivers in Ireland were taken aback by the news that they might be liable for VAT on the commissions paid to Uber. The revelation that Uber, unlike some competitors, did not charge and pay VAT on commissions to the Revenue Agency (Revenue) left Uber drivers in a challenging position, potentially the ones Revenue might pursue for due VAT.

VAT Liability of Uber Drivers

Two other transportation companies that operate similarly to Uber are Bolt and FreeNow. However, Bolt and FreeNow charge drivers fees on the drives paid by end users and collect and remit VAT to the Revenue. On the other hand, Uber did not do this, jeopardizing around 11,000 Uber drivers, who now do not know if and when the tax authorities will ask them to pay the VAT owed.

Regarding this issue, Uber stated that although there is no VAT on fees for transporting passengers in Ireland, services that they provide to drivers are subject to VAT, and all drivers should be registered for VAT. Since Uber does not deal with this on drivers' behalf, all drivers in Ireland should have completed the registration process independently.

Based on the information revealed by Revenue representatives, it seems unlikely that they will pursue the VAT. Still, they will monitor tax returns that Uber and Uber's drivers filed to investigate compliance further. One possible outcome for drivers could be that they will not receive tax clearance certificates and, therefore, cannot renew public service licenses.

Regarding the VAT due, Uber drivers' owes to Revenue are estimated to be small, providing some reassurance about the potential financial impact.

Conclusion

This situation seems like an unpleasant experience for all Uber drivers, and the question remains open: Why did Uber not charge VAT in Ireland, thus reducing the administrative burden for them? Furthermore, from a Revenue perspective, it might be easier to collect VAT from Uber as a single entity and not deal with thousands of VAT returns submitted by Uber drivers.

It is still unclear whether the Revenue will collect VAT from drivers or if there will be another solution to the problem.

Source: Irish Times

Are taxi services in Ireland subject to VAT?

No, passenger transport services, including taxi rides, are exempt from VAT in Ireland. Therefore, drivers do not charge VAT on fares collected from passengers.

How does VAT apply to commissions paid to Uber by drivers?

While passenger transport services are VAT-exempt, the facilitation services provided by Uber to drivers are subject to VAT. This means that commissions or service fees that drivers pay to Uber for using the platform should include VAT.

Does Uber charge VAT on the commissions it collects from drivers in Ireland?

Unlike some competitors, such as Bolt and FreeNow, which charge VAT on driver commissions and remit it to the Revenue, Uber has not been charging VAT on these commissions in Ireland. This practice has raised concerns about potential VAT liabilities for drivers.

Are Uber drivers in Ireland required to register for VAT?

Yes, drivers receiving services from abroad, including those provided by Uber (which is based in the Netherlands), are required to register for VAT in Ireland, regardless of their turnover. This registration obligates them to account for VAT on the services received.

What is the 'reverse charge' mechanism, and how does it affect Uber drivers?

Under the reverse charge mechanism, when an Irish VAT-registered driver receives services from a non-Irish supplier like Uber, the driver must self-account for the VAT on the service fee. This means the driver declares both the VAT payable and, if applicable, the VAT reclaimable on their VAT return.

What are the potential consequences for Uber drivers regarding unpaid VAT on commissions?

If drivers have not registered for VAT or accounted for VAT on commissions paid to Uber, they may face liabilities for unpaid VAT. The Revenue may monitor tax returns to ensure compliance, and non-compliant drivers could encounter issues such as difficulties in renewing public service licenses due to lack of tax clearance.

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