Irish VAT grouping rules: implications for businesses

Irish Revenue has announced a major change to VAT grouping rules, effective from 19 November 2025. From now on, only establishments located in Ireland can form part of an Irish VAT group.  

Overseas branches or head offices of Irish entities will no longer qualify. The shift brings Irish practice into line with EU case law, following two key Court of Justice of the European Union (CJEU) decisions. 

The implications are wide-ranging. For the first time, transactions between Irish and non-Irish establishments may attract VAT. This affects how exemptions and recovery positions are calculated, and may alter the cost base of certain services, especially in cross-border sectors. A transitional period runs until 31 December 2026 for existing groups.

Key changes:  

• Irish VAT groups are now restricted to Irish establishments only.
• Overseas branches or head offices of Irish entities are excluded.
• Intra-entity transactions involving non-Irish establishments will no longer be disregarded for Irish VAT purposes.

Behind the change  

The move reflects the EU’s principle of territoriality, which limits VAT grouping to entities established within a single member state.  

In Skandia (C-7/13), a Swedish branch received services from its US head office. The case was a turning point as the Court held that once a branch joins a VAT group, it becomes part of a new taxable person — the VAT group itself — separate from the head office. As a result, the supply between the two became subject to VAT. It introduced the concept that VAT grouping overrides the “unity” of the legal entity for VAT purposes. This overturned the long-standing view that head office and branch were a single taxable person. 

The Danske Bank (C-812/19) case extended the principle. A Danish head office, part of a Danish VAT group, supplied services to its Swedish branch. Affirming and extending the Skandia principle, the Court held that because the head office belonged to a VAT group, it was distinct from the branch for VAT purposes. The Swedish branch therefore, had to apply reverse charge VAT on the services it received.  

Together, these rulings established that VAT grouping overrides the traditional ‘whole entity’ approach.

What it means for businesses

For Irish taxpayers, the change alters how cross-border activities are treated. Internal charges between Irish and non-Irish establishments can no longer be ignored for VAT. Services received from overseas head offices or branches may now fall within the reverse charge obligations.  

Multinationals with EU VAT groups will need to reassess whether Irish branches remain connected for VAT purposes, as membership in a non-Irish group may now sever that link.

The practical effects will vary by sector. For financial services and insurance businesses, the loss of the current VAT ‘disregard’ could increase irrecoverable VAT. Others may find that some transactions become taxable, improving recovery rates. Each business will need to model its own position carefully. 

Next steps

Revenue has introduced a transitional period until the end of 2026, giving affected groups a limited time to adapt. Businesses should start by reviewing their VAT group structures and mapping intra-entity transactions.  

Understanding which services may now attract VAT will be essential to forecasting the cost impact and identifying recovery opportunities. Where uncertainty remains, early engagement with Revenue is advisable. 

A new direction for Irish VAT policy

This development represents one of the most significant shifts in Irish VAT policy in recent years. It aligns Ireland with EU norms but adds complexity for organisations with overseas operations.  

The removal of the ‘whole entity’ principle means long-established practices for ignoring intra-entity transactions will no longer apply when overseas establishments are involved. 

Our team is actively engaging with Revenue and industry bodies to clarify practical issues and transitional measures.