Irish VAT grouping rules

Summary

Businesses which currently have establishments (e.g. head office and branch) of the same legal entity in both Ireland and abroad, and which are members of a VAT group in Ireland or another EU member state, will need to review the Irish VAT treatment of intra-group transactions involving the Irish establishment.

It is possible that Irish VAT will now apply to certain transactions within the same legal entity in circumstances that were not previously the case, e.g. supplies of services from a head office to a branch or from one branch to another.

On 19 November 2025, the Irish Revenue Commissioners (“Revenue”) published new guidance on the application of VAT grouping rules in Ireland to more closely align Irish VAT grouping rules with the CJEU Judgments in Skandia and Danske Bank on a phased basis.

This mirrors the position applying in most other EU Member States.

The new guidance signals a change in interpretation on the territorial scope of VAT grouping in Ireland and the effect of VAT grouping in other EU Member States, which could have a significant impact for entities which have establishments in both Ireland and other EU Member States and which are members of a VAT group in Ireland or in another EU Member State(s).

The new guidance applies immediately to VAT groups established from 19 November 2025. For VAT groups already in place before that date, a transitional period up to 31 December 2026 applies.

What has changed?

Up to this point, Revenue’s published position had been that where an entity is a member of an Irish VAT group, it is the entire legal entity, including its foreign establishments (if any), that is in the Irish VAT group.

This meant that charges between an Irish and foreign establishment of the same legal entity (e.g. head office to branch) were disregarded for Irish VAT purposes, regardless of whether the entity was a member of an Irish VAT group or not.

Similarly, the existence of a foreign VAT group was not considered to impact the treatment of supplies of services involving an Irish establishment of a foreign VAT grouped entity.

Under the newly published guidance, Revenue have updated their interpretation such that VAT grouping in Ireland only applies to the Irish establishment of the VAT group members (i.e. an Irish head office or branch) – any foreign establishments of that same legal entity are excluded from the scope of the Irish VAT group.

Membership of a VAT group in another EU Member State may also now impact the analysis in Ireland. As explained below, this reflects decided case law of the CJEU concerning the impact of VAT grouping.

What does this mean?

This means that supplies of services between a VAT grouped Irish establishment and its foreign establishment(s) are no longer disregarded under the Irish VAT grouping rules and VAT could therefore arise on those supplies, unless the supplies are otherwise exempt from VAT.

For example, services from a UK branch to its Irish head office which is a member of an Irish VAT group may become subject to VAT as a result of these changes.

This could cause additional VAT leakage for businesses which do not a right to full VAT recovery, such as banks, insurance providers, asset managers and other providers of VAT exempt services (or in some cases provide additional VAT recovery).

A similar position applies where a foreign establishment (e.g. an EU head office) is a member of a VAT group in another EU Member State and is involved in a supply of services to or from an establishment in Ireland (e.g. Irish branch).

The supply of such services will no longer be disregarded from an Irish VAT perspective under the new rules. For example, services from a French head office to its Irish branch may become subject to VAT in Ireland where the head office is in a French VAT group (even if the Irish branch is not in an Irish VAT group).

What has not changed?

There is no change to the VAT treatment of supplies of services from a head office to an Irish branch where neither the Irish establishment nor other EU establishment(s) are members of a VAT group in Ireland or another EU member state – those supplies will continue to be disregarded.

What is the background to this change?

The Court of Justice of the EU (CJEU) confirmed in the FCE case (C-210/04) that transactions between two establishments of the same legal entity are not subject to VAT (as the two establishments are not legally independent of each other).

However, subsequent CJEU caselaw, in particular the Skandia America and Danske Bank Judgments, considered that supplies between two establishments of the same legal entity are no longer disregarded where either or both are members of a VAT group in an EU member state.

Notwithstanding the case law developments, the practical application of VAT grouping provisions has continued to vary across the EU.

These changes will align the position in Ireland with that applying in most other EU Member States.

How might this impact in practice and what should I do?

Businesses which currently have establishments (e.g. head office and branch) of the same legal entity in both Ireland and abroad, and which are members of a VAT group in Ireland or another EU member state, will need to review the Irish VAT treatment of intra-group transactions involving the Irish establishment.

It is possible that Irish VAT will now apply to certain transactions within the same legal entity in circumstances that were not previously the case, e.g. supplies of services from a head office to a branch or from one branch to another.

While the change applies to all businesses, its impact will be more keenly felt in businesses with no or limited VAT recovery, as any additional VAT arising would be an additional cost for those businesses.

The change could possibly have the opposite effect for some and result in an increase in Irish VAT recovery in certain cases including but not limited to supplies from an Irish establishment to a foreign establishment (where a VAT group exists) as those supplies may become taxable (having previously been disregarded).

Groups with establishments in the UK may also need to consider the impact of the change in Ireland on their VAT position in the UK on any intragroup services received from an Irish establishment.

It is welcome that Revenue have introduced a transitional period until 31 December 2026 for existing VAT groups before the new rules fully take effect.

However, affected businesses will nonetheless need to begin to assess the impact of the changes and consider any actions that could be taken to possibly mitigate any impact, such as breaking an existing Irish VAT group.

Get in touch

For more information on this change and to discuss what you need to do to prepare for the change, please contact Glenn Reynolds or David Duffy of our VAT team.