- Transition from Fixed to Variable Direct Debit (VDD):
- Background:
- VDD was first introduced in January 2019 for Employer Income Tax, PRSI, USC, and LPT.
- It has been widely adopted and is now being extended to VAT.
- VDD was first introduced in January 2019 for Employer Income Tax, PRSI, USC, and LPT.
- It has been widely adopted and is now being extended to VAT.
- VAT Return Filing: Will change from annual to bi-monthly.
- Payment Structure: Revenue will debit the exact VAT amount due on the due date, rather than a fixed monthly amount.
- Payments will only be made if a new VDD mandate is authorized.
- Action Required:
- No immediate action is needed.
- Businesses should continue using the current FDD scheme until contacted by Revenue.
- Revenue will provide transition instructions ahead of each business’s VAT period-end.
- Support Available:
- BCA offers assistance to help businesses understand and prepare for the transition.
To prepare for the transition from Fixed Direct Debit (FDD) to Variable Direct Debit (VDD) for VAT payments in Ireland, here are the key steps businesses should take:
1. Understand the Key Changes
- Filing Frequency: VAT returns will move from annual to bi-monthly.
- Payment Method: Revenue will automatically collect the exact VAT amount due on the due date.
- Eligibility: VDD is available to all VAT-registered businesses, regardless of liability thresholds.
2. Review Your Current Setup
- Check if you’re currently using FDD for VAT.
- Identify when your annual VAT period ends, as this will determine when you transition.
- Impact on your bookkeeping software, and records.
3. Watch for Revenue Communications
- Revenue began sending general letters in April 2025.
- Tailored instructions will be sent to each business before VAT period ends, up to April 2026.
4. Prepare for Bi-Monthly Filing
- Ensure your bookkeeping and VAT records are up to date.
- Consider adjusting internal processes to handle more frequent VAT filings.
5. Set Up a Variable Direct Debit Mandate
- Once instructed by Revenue, cancel your FDD and authorise a VDD mandate via ROS (Revenue Online Service).
- Revenue will only collect payments after the mandate is in place.
6. Evaluate Filing Frequency Options
If you’re a small business, you may qualify for:
- Four-monthly returns (VAT liability between €3,001 and €14,400).
- Six-monthly returns (VAT liability €3,000 or less).
You can apply to Revenue to avail of these reduced filing frequencies.
Contact BCA if you have any questions on the above.