VAT is governed by the EU VAT Directive with which Irish VAT law must comply. In Ireland businesses are not obliged to register for VAT, and can consequently remain exempt from VAT, where their turnover in a 12 month period is less than €75,000 (in the case of businesses supplying goods) and €37,500 (in the case of businesses supplying services).
Ireland's VAT registration thresholds date from EU accession and the VAT Directive only provides for the raising of those thresholds by Member States to maintain their value in real terms. That is, they may only be increased in line with inflation. The Irish VAT thresholds were increased to their current values on 1 May 2008. As inflation levels currently remain lower than the rate applying in 2008, it is not possible to increase the VAT registration thresholds.
I would point out that Ireland’s VAT registration threshold for small enterprises supplying services is the ninth highest in the EU while the goods threshold is the third highest.
While the registration thresholds are designed to reduce the administrative burden on businesses and Revenue, registration thresholds are not intended as a means of keeping small businesses permanently outside the VAT system. Therefore in setting registration threshold levels, the objective is to strike an appropriate balance between the desirability of reducing the administrative burden on small businesses and the need to avoid undermining tax compliance or causing competitive distortions relative to registered firms.