Page Contents
Key Contacts
Related Services
On 19 November, the Irish Revenue Commissioners (Revenue) published new guidance on the “Territorial Scope of VAT groups” (the Guidance).
The Guidance, which applied with immediate effect, will limit VAT grouping in Ireland to establishments located within the state. Non-Irish establishments, such as foreign head offices or branches, will no longer be able to form part of an Irish VAT group. As a result of this change, supplies between non-Irish establishments and an Irish VAT group, which previously could have been disregarded under VAT grouping rules, will now be fully within the scope of VAT.
This is a major change in Irish VAT policy. It aligns Irish territorial rules on VAT grouping with the principles outlined in the CJEU judgments of Skandia[1] and Danske Bank[2]. The approach taken in these cases has already been widely adopted throughout the EU, so the change in Ireland’s approach will bring it in line with the majority of its European peers.
What were the old rules?
Until now Revenue’s position has been that where an entity with a fixed or business establishment in Ireland joins an Irish VAT group, the entire legal entity, including any foreign head office or branch of that entity, may join the VAT group. This allowed for intra-group transactions between a foreign head office or branch and a member of the Irish VAT group to be disregarded for VAT purposes.
How will businesses be impacted by the new rules?
Going forward, VAT grouping will only be available to establishments located within Ireland; any foreign head office or branch will no longer be eligible to be part of the VAT group. As a result, it will no longer be possible to rely on VAT grouping to have services between an Irish entity and its foreign head office or branch disregarded for VAT purposes. Instead, the receipt of services by an Irish entity from its foreign head office or branch will be treated as a reverse charge service for VAT purposes, and the Irish recipient will be required to operate VAT under the reverse charge mechanism on the value of the service received (unless the services received are exempt services).
The obligation to operate reverse charge VAT on cross-border transactions may have a detrimental effect on the business of multinational companies, particularly those with restricted VAT recovery, such as those operating in the banking, finance or insurance sectors. For these companies, any irrecoverable reverse charge VAT suffered may be a direct cost for the business and affect overall profitability.
Transition period
The new rules apply to all VAT groups established after 19 November 2025.
For pre-existing VAT groups, there is a transitional period until 31 December 2026, during which they may rely on the old rules. This will allow those groups time to review, and potentially restructure, intra-group transactions so as to minimise any cash-flow issues or business obstructions associated with the new rules.
Next steps
Multinational companies engaged in cross-border transactions involving an Irish VAT group should carry out an impact assessment to identify how the new rules will affect their business. We would recommend that this assessment be carried out as soon as possible to allow sufficient time to carry out any necessary modifications to the manner in which intra-group transactions are affected before the end of the transitional period.
For more information, please contact your usual A&L Goodbody Tax contact.
Date published: 3 December 2025
