On 19 November 2025, the Irish Revenue released a Tax and Duty Manual, “Territorial Scope of VAT Groups”, which sets out a major change in the territorial scope of VAT Groups in Ireland, bringing its interpretation in line with the Skandia (C 7/13) and Danske Bank (C-812/19) principles.
Position to Date
Prior to its release, the Irish Revenue took a broad interpretation of the Irish VAT Grouping rules for head offices and branches, and as outlined in published non-statutory Irish Revenue guidance viewed the whole entity as being a member of the Irish VAT Group i.e., including any overseas head office or branches (if applicable), and not just the Irish establishment, commonly referred to as the “whole entity” approach.
The consequence of this interpretation was that any transactions between the overseas establishment/s and members of the Irish VAT Group were not considered supplies for VAT purposes (subject to the normal VAT Group exceptions).
As a result of continuing to apply the “whole entity” approach, the Irish Revenue had not implemented the Skandia (C 7/13) and Danske Bank (C-812/19) principles.
Updated Territorial scope of VAT Groups in Ireland
However, effective immediately for any VAT Groups formed from 19 November 2025, and effective from 1 January 2027 for any existing VAT Groups as of 19 November 2025, Irish VAT Grouping will only be available to Irish establishments.
This means that non-Irish head offices or branches may not be members of an Irish VAT Group and therefore supplies between such non-Irish establishments and an Irish VAT Group cannot be disregarded and should be within the scope of VAT (subject to the normal VAT rules).
This represents a significant change in the VAT treatment applicable to the receipt of services by Irish VAT Groups from the VAT Group members’ non-Irish establishments – see some examples set out below.
Example 1 - an Irish company and an Irish branch of a French company form an Irish VAT Group. The French head office supplies services to the Irish VAT Group. The supply of the services may now fall within the scope of VAT, and the VAT Group may be obliged to account for VAT on the reverse charge basis (subject to the services being taxable services).
Example 2 - a Luxembourg company is a member of a VAT Group in Luxembourg. The Luxembourg company has a branch in Ireland. The Luxembourg head office supplies services to the Irish branch. The supply of the services may now fall within the scope of VAT, and the Irish branch may be obliged to account for VAT on the reverse charge basis (subject to the services being taxable services).
Finally, it should be highlighted that there should be no change to the VAT treatment applicable to supplies between head offices and branches where neither the head office nor the relevant branch are members of VAT Groups in Ireland or in another EU Member State.
Impact on Businesses
Businesses that have its head office or a branch in Ireland and where the business’s head office and/or branches are members of a VAT Group in Ireland or in another EU Member State need to immediately assess the impact of this change, in particular, those with restricted VAT recovery entitlement e.g., funds, banks, insurance suppliers etc., as this change could have a real bottom line cost for such businesses.
There may also be scope for VAT recovery rates potentially increasing because of transactions that were previously disregarded for VAT purposes now coming within the scope of VAT.
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