Significant 2025 changes to Irish VAT grouping rules

On 19 November 2025, Irish Revenue published a new Tax and Duty Manual (TDM), Territorial Scope of VAT Group, introducing a significant change to the territorial scope of VAT groups in Ireland.

The changes introduced will have a significant impact on how cross‑border supplies are treated within corporate groups and will alter VAT outcomes for many organisations operating across multiple jurisdictions.

What has changed?

• Only Irish establishments can be members of an Irish VAT group, so only the Irish head office or Irish branch of an entity.
• Oversees establishments, whether a branch or head office, of the same legal entity, cannot be part of the Irish VAT group.
• Supplies between Irish establishments (inside the group) and overseas branches/head offices (outside the group) are no longer disregarded for Irish VAT purposes.
• Internal service flows between establishments of the same legal entity may now be subject to VAT, typically under the reverse‑charge mechanism.

This aligns Ireland with CJEU case law (Skandia and Danske) and the approach in most EU Member States.

Position prior to 19 November 2025

Prior to 19 November 2025, the Irish Revenue Commissioners applied a very broad view of VAT groups: once an entity joined an Irish VAT group, the entire entity, including its head office and any branches, wherever located, was treated as part of the Irish VAT group. 

This meant that cross-border transactions within the same legal entity, such as between an Irish branch and its foreign head office or another branch, were generally ignored for VAT purposes, even if one of those establishments was part of a VAT group in another country.

When the new rules apply

• New VAT groups formed on or after 19 November 2025 are immediately subject to the new rules.
• Existing VAT groups have a transitional period until 31 December 2026.

Key impacts for businesses

Organisations with establishments in Ireland and overseas, and which are VAT-grouped in Ireland or overseas, need to carefully review and map flows to identify the impact of this change on their activities.

There could be an increase in irrecoverable VAT for businesses engaged in activities with limited VAT recovery. Conversely, there could be an opportunity to increase VAT recovery for other businesses due to increased taxable turnover. 

There are many practical implications, including VAT invoicing, accounting and compliance obligations. Clients will also need to consider potential Transfer Pricing related consequences and opportunities arising from these changes. 

What businesses need to do now

Businesses need to review and map establishment footprints for Irish entities, as well as their overseas VAT grouping arrangements, to identify affected service flows.

Only then can businesses identify and consider what steps should be taken to manage VAT risks or potential opportunities these changes will bring about.

All of this needs to be done before the 31 December 2026 deadline.

How Forvis Mazars can help

We are actively engaging with the Revenue Commissioners to ensure clarity on the practical application of the new rules.

Our VAT team is ready to help you assess the impact and navigate this change.