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Forestry and taxation

Forestry and taxation

In this video, Declan McEvoy, Head of Tax with IFAC explains taxation in relation to timber sales. He discusses VAT regulations and the difference between VAT registered and VAT unregistered farmers. Steven Meyen, Teagasc Forestry Development Officer explains the different timber sale methods also

Different Timber Sale Methods

Standing Sales

The forest owner sells timber as it stands in the forest at an agreed price in advance of harvesting. The buyer is responsible for the harvesting operations. The timber is exempt from income tax but liable for PRSI and USC.

Roadside Sales

Timber is sold to the buyer on the forest road. The harvesting contractor is paid by the forest owner. The haulage is covered by the buyer. Where trees have been harvested and forwarded out of the forest and placed ‘roadside’, the value of the sale has increased. Once again, you are exempt from income tax but liable for PRSI and USC.

Mill Gate Sales

The buyer pays for the timber delivered to their yard/mill. The forest owner pays for the harvesting and haulage cost. With a mill gate sale, the timber is harvested, forwarded out of the forest and delivered to the sawmill. You are liable to pay PRSI and USC on the profit of the timber sale.

VAT regulations

VAT unregistered farmer

When selling timber as an unregistered farmer, you can add the 5.6% flat rate of VAT to the price of the timber. This is important to remember as you can see from the example below.

VAT registered farmer

As a VAT registered farmer, you can claim the VAT back that you have been charged by the contractor on felling, transport and so on. 

Health warning

If you're thinking of selling timber then it is advisable to get professional taxation advice before prices are agreed and contracts are signed!

Watch Declan McEvoy, Head of Tax, IFAC, in this short video clip below

If you liked this article and video you might also like this article and video: How to sell timber - A harvester's perspective

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