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To form a VAT group, an application must be made to Revenue and approval is at the discretion of the Revenue.
All group members must be established in Ireland and at least one member must be a VAT registered entity. Once a VAT group is formed, one of the persons in the group becomes the “group remitter”. This is the sole person within the group that bears responsibility for submitting a single bi-monthly VAT return on behalf of the group. The entire group is considered a single VAT registered body and each member is jointly and severally liable for the group’s VAT liabilities and ensuring that all legislative requirements are complied with. Intra-group transactions are ignored for VAT purposes (subject to some small exceptions).
Interestingly, all group members must continue to issue invoices for sales via their own names and VAT numbers despite supplies being deemed to have been made by the group as a single person.
The remitter may file Intrastat returns for some or all group members. However, VIES returns must be filed under the members’ individual VAT numbers. Transactions between members are ignored for the purposes of VIES and Intrastat.
In order for an application to be successful, the applicants must prove to Revenue that they are bound by financial, economic and organisational links and that a VAT group would be necessary or appropriate for the efficient and effective administration of tax. All of these conditions must be met.
- Financial link: Demonstrated by common control (i.e. the holding of 50% or more of the issued share capital or voting rights or the power to appoint 50% of more of the board of directors).
- Economic link: An economic link is deemed to exist if any of the following conditions are met.
- The principal activity of the group members is of the same nature, or
- The activities of the group members are complementary or interdependent, or
- One member of the group carries out activities which are wholly or substantially to the benefit of the other members.
- Organisational link: Different forms of organisational links may be recognised. If there is a shared, or partially shared, management or corporate structure an organisational link will be deemed to exist.
Effective date of VAT group registrations
Revenue recently issued some guidance to clarify the effective date of VAT group registrations. Where an application has been made to form a VAT group and it has been successful, Revenue will issue a letter to each member specifying the effective start date of the group. This will not be any earlier than the first day of the VAT period where the application was made.
We have assisted many groups to establish VAT groups which has greatly reduced the administrative burden and costs associated with VAT compliance. Please make contact with us if you would like to discuss if a VAT group is suitable for your business needs.