VAT grouping not longer available to non-established entities

Purpose and Scope

The manual provides guidance on the territorial scope of VAT groups under Irish law, specifically referencing section 15 of the VAT Consolidation Act 2010 and regulation 4 of S.I. no. 639 of 2010. It is intended as a guide and not as professional or legal advice.

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Key Principles

1. VAT Grouping Availability

• VAT grouping is only available to establishments located within Ireland (“the State”).
• Only a head office or branch established in Ireland can be a member of an Irish VAT group.
• Non-Irish head offices or branches are not eligible for Irish VAT group membership.

2. Legal Basis and Case Law

• The FCE Bank case (CJEU) established that a head office and its branch are the same person for VAT purposes, provided neither is in a VAT group.
• The Danske Bank case (CJEU) clarified that only establishments within a Member State can join that state’s VAT group regime.

3. VAT Treatment of Supplies

• Supplies between non-Irish establishments and an Irish VAT group are within the scope of Irish VAT.
• The place of supply and VAT deductibility depend on the location and VAT group membership status of the entities involved.

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Implementation

• The guidance is effective immediately for VAT groups established after its publication.
• Existing VAT groups affected by the change must comply by 31 December 2026.
• Transitional arrangements can be agreed with the Revenue District for impacted groups.

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Practical Examples

Example 1:
If a company with a branch in another EU Member State (neither in a VAT group) supplies services to its branch, the supply is outside the scope of VAT (they are the same person).

Example 2:
If Company A and Company B form an Irish VAT group, and Company B supplies services to Company A’s non-Irish branch, the supply is within the scope of VAT. The place of supply is where the branch is established.

Example 3:
If an Irish branch of Company B is in a VAT group, but the head office is outside Ireland and supplies services to the group, the VAT group must account for Irish VAT on a reverse charge basis for taxable supplies.

Example 4:
If a branch is in Ireland and the head office is in another Member State (and part of a VAT group there), supplies between the head office and Irish branch are within the scope of VAT. The Irish branch must account for reverse charge VAT, as the head office and branch are now considered separate taxable persons.

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References

• FCE Bank case (C-210/04)
• Danske Bank case (C-812/19)
• Further reading: Tax and Duty Manual VAT Groups (link provided in the document)

Source Revenue.ie

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