Irish VAT grouping rules: Key changes explained

Updated guidance narrows the territorial scope of Irish VAT Groups and recognises EU VAT Groups involved in the provision of intra-group services.

The Irish Revenue Commissioners have issued new VAT grouping guidance effective 19 November 2025. These changes bring Ireland closer to EU standards following recent CJEU rulings in Skandia and Danske Bank. For businesses operating across borders, the implications could be significant.

What’s changing

Irish VAT groups now include only Irish establishments — head offices or branches. Foreign establishments are excluded. Also, membership of a VAT group in another EU member state may now influence Irish VAT treatment. This means certain intra-company transactions, such as services between an Irish branch and an overseas head office, could become subject to Irish VAT.

Supplies from a head office to an Irish branch remain disregarded where neither establishment belongs to a VAT group in Ireland or another EU member state.

Why the change

The CJEU previously ruled that transactions within the same legal entity were not subject to VAT (FCE case). However, later judgments (Skandia America and Danske Bank) clarified that this exclusion does not apply when one or both establishments belong to an EU VAT group. Ireland is now aligning with the approach taken in most EU Member States.

Practical impact

The changes affect all businesses operating through branches and EU VAT groups, but the greatest impact will be on businesses with limited VAT recovery such as banks, insurers, asset managers and other partially exempt operators.

Services purchased by an Irish establishment from its head office or foreign branch may now be regarded as transactions between two entirely separate establishments for VAT purposes. This could lead to additional VAT costs, as these intra-entity services, which were previously disregarded for VAT purposes, may now be subject to reverse charge VAT in Ireland. Conversely, when an Irish establishment supplies services to its head office or foreign branch, this may increase VAT recovery in Ireland.  

Timeline

Immediate effect for VAT groups formed on or after 19 November 2025, with a transitional period until 31 December 2026 for existing groups.

Key actions businesses can take today

1. Assess intra-group transactions

Review how the new rules affect services between Irish establishments and overseas branches. Identify transactions that were previously disregarded and determine whether they now fall within the scope of Irish VAT. This assessment is critical for businesses with complex structures or multiple VAT groups across jurisdictions. 

2. Confirm reverse charge obligations

Determine whether services received from foreign branches now trigger reverse charge VAT in Ireland. Ensure your finance teams understand the new requirements and update internal processes to avoid compliance risks. Accurate application of reverse charge rules will help prevent unexpected VAT liabilities. 

3. Review VAT recovery calculations

Evaluate how the changes impact your input VAT recovery entitlement. For partially exempt businesses, even small shifts in recovery rates can have material cost implications. Consider modelling different scenarios to understand the financial impact and plan accordingly. 

4. Consider restructuring VAT groups

Where the changes create inefficiencies or additional VAT leakage, explore restructuring options. This may include revisiting group membership or adjusting service flows between entities. Any restructuring should be aligned with your broader tax and operational strategy. 

5. Monitor cross-border implications

Keep an eye on potential knock-on effects in other jurisdictions. EU member states may interpret similar rules differently, so a coordinated approach across your operations is essential. Regular monitoring will help you stay ahead of compliance requirements and avoid surprises.

We’re here to help you

Our team can help you assess the impact of these changes and develop strategies to manage VAT costs effectively. To discuss this update further, contact us today.