RSM Ireland VAT newsletter - Spring update

Ireland has taken a major step toward digital VAT reporting with Revenue confirming that from 1 November 2028, VAT‑registered large corporates must issue structured e‑invoices and report domestic B2B transactions digitally.  

All businesses must also be able to receive e‑invoices by this date.

Read the full update  on our website here. 

Irish Revenue has updated its Tax and Duty Manual on Relevant Contracts Tax: Relevant Operations on the application of Relevant Contracts Tax (“RCT”) to mixed contracts.

The guidance provides that where a single contract exists for the sale of land and construction operations, RCT should only apply to the construction element of the contract.  

The guidance further confirms that this principle should apply to other common mixed contracts such as:

• Design and build contracts (design is outside RCT; build-element is subject to RCT)
• Supply and install contracts (supply of materials is outside RCT; installation is subject to RCT) 

Pricing and apportionment 

Where a single price applies to a mixed contract, the principal contractor must reasonably apportion the consideration and apply RCT on the construction-related element of the contract and accordingly self-account for VAT under the reverse charge basis (including a careful review of the contract in order to do so). 

Practical implications 

While the guidance does not bring in new activities to the scope of RCT, this update should be a fresh reminder of the importance of reviewing contracts and appropriate price apportionment to ensure RCT and VAT compliance.

Read the full update on our website here.

As announced in Budget 2026, the VAT rate on the supply and construction of qualifying apartments and apartment blocks has been reduced to 9%, effective for the period  26 November 2025 to 31 December 2030.  Revenue have set out in further detail the VAT treatment of same in its latest Tax and Duty Manual Supply and Construction of Qualifying Apartments and Apartment Blocks. Please see here for the full TDM.  

Qualifying criteria  

In order to fall within the scope of the 9% VAT rate, the supply must be “new” for VAT purposes and be that of a qualifying apartment in a qualifying apartment block that is to be used for residential purposes. This further extends to qualifying student accommodation, qualifying sites and construction services.  

In addition to the above,  internal and external common areas as well as car parking spaces should qualify for the 9% rate where the supply relates to a qualifying apartment.   

Qualifying apartment  

In practice, a qualifying apartment includes studios, basement apartments, penthouse apartments, duplex apartments, and student accommodation.  

Qualifying apartment block  

A qualifying apartment block is defined as a multi-storey building with a minimum of two floors, a minimum of three apartments, and common access.  

Grouped or common access requires that at least three of the apartments in the building must share a common entry point to the building (i.e. main front door or shared external stairwell).  

Qualifying sites  

Qualifying sites include sites on which a qualifying apartment/apartment block will be constructed as per the above criteria.  

Construction services  

The supply of construction services to complete a qualifying apartment/apartment block should also be within the scope of the 9% VAT rate up to the point of completion. However, any construction related services provided post completion should revert to VAT at the first reduced rate, currently 13.5%.  

Exclusions

Specifically excluded from this provision are the supply and construction of apartments under duplex units or an apartment over a shop or townhouse (where the property is considered “new”).  

In addition, where a building has a mix of commercial and residential units with a shared area, the VAT rate applicable to the shared area must be apportioned based on floor area. In addition, any element of the apartment block not used for residential purposes does not qualify for the 9% rate.  

Any social areas, such as gyms, work hub area, cinema, etc. do not qualify for the 9% rate. 

Interaction with RCT  

For the construction of qualifying apartments and apartment blocks falling within the scope of Relevant Contracts Tax (“RCT”), VAT at 9% should be accounted for under the reverse charge basis by the Principal Contractor. Where RCT does not apply, normal VAT rules apply.  

Practical implications  

Businesses in the property construction/development are advised to review their supplies and ensure compliance in line with Revenue guidance.  

Revenue has published updated guidance in its Tax and Duty Manual How to protect your business from becoming involved in VAT fraud (available here). The guidance acts as a reminder to businesses to ensure they understand the risks of engaging in VAT fraud, whether knowingly or where they should have known, and sets out practical examples of steps to undertake to reduce risks.  

Risks and practical implications 

Revenue will impose principles established under CJEU case law where it is satisfied a taxpayer was aware, or should have been aware, that a transaction was connected with VAT fraud. In such situations, Revenue may refuse VAT input deductions or the application of zero‑rating on intra‑Community supplies, even where the taxpayer itself did not directly commit fraud. The taxpayer can also be held jointly and severally liable for any VAT loss arising from a fraudulent transaction and Revenue may impose penalties where appropriate.

Businesses are encouraged to regularly review their supply chains, strengthen internal due diligence and record‑keeping procedures, and take extra care where transactions appear unusual or too good to be true. Where concerns arise, further enquiries should be made before proceeding.

We are seeing Revenue, as well as tax authorities of other EU Member States, seeking to review how trading relationships came to exist as well as querying the KYC information held to validate suppliers and customers. It is therefore important that all taxpayers can clearly document they have followed the appropriate procedures, in particular those involved in EU trade.  

Due Diligence expectations 

Businesses are reminded to carry out appropriate due diligence checks when entering into new trading relationships and to continue reviewing existing ones, particularly where there are changes in circumstances. This may include checking VAT registration details, obtaining incorporation, carrying out credit checks, seeking references, maintaining direct contact with trading partners, and reviewing payment and banking arrangements.

It is also important for businesses to keep clear records of the checks carried out, including when they took place, as this information may be requested by Revenue during an audit or intervention. 

Identifying risk indicators 

Businesses should be cautious where transactions do not align with normal commercial practice in their industry. This could include concerns around the background or credibility of suppliers or customers, unusual payment terms, transactions that appear unrealistically favourable, or where pricing and margins do not make commercial sense. Where any red flags arise as part of investigations, this may indicate a higher risk of VAT fraud. 

Revenue have confirmed that from 1 January 2026, as amended in Finance Act 2025, the hire of a room by all providers should be subject to VAT at the standard rate, currently 23%. This is in line with CJEU case law and has been confirmed by Revenue in its revised Tax and Duty Manual, VAT treatment of the hire of a room, which can be reviewed further here.  

What has changed?  

From 1 January 2026, the hire of a room will be treated as a taxable supply of services at the standard rate of VAT, currently, 23%, regardless of venue.  

Prior to this change, the hire or letting of a  room specifically in hotels and guesthouses were liable to VAT at the reduced rate. However, the hire of a room in a conference centre or other premises was VATable at the standard rate and therefore, a difference in the VAT rates applied. This distinction has now been removed and the hiring of a room for the purposes of conferences, meetings, training sessions, and other events, irrespective of venue (including hotels, guesthouses, and conference centres),  should now be subject to VAT at the standard rate.  

Advance payments  

This change is effective from 1 January 2026. Any advanced payments made before this date will remain subject to the previous applicable rate with any final payments made after 1 January 2026 subject to VAT at the standard rate.   

Practical implications  

Businesses such as hotels and guesthouses should now seek to review their systems to ensure the correct VAT rate is being applied on the supply of hired rooms and is being distinguished from the normal supply of accommodation. In particular, where part payment was made pre-1 January 2026 in respect of a supply to take place post 1 January 2026, impacted businesses should ensure that the correct VAT rate is being applied on the balancing invoice.  

Businesses hiring rooms for the purposes of business events and conferences may need to consider whether VAT incurred can be deductible.  

Overview

TAC determination 15TACD2026 relates to an appeal made to TAC by an Irish resident business (“the Appellant”) against a VAT assessment raised against it by Revenue for c. €9 million for periods from 1 January 2021 to 31 December 2022. The assessment was raised on the basis that the Appellant was not entitled to apply the Margin Scheme on the onward supply of second-hand mobile phones and other electronic goods in the State. It was determined that the Appellant could not provide supporting documentation to evidence;

1.   its entitlement to operation the Margin Scheme, 
2.  that the goods originated from Northern Ireland (and not Great Britain), and 
3.  That it took all reasonable steps to satisfy itself of its supplier (“the Supplier”) being registered for VAT in Northern Ireland post Brexit.  

Background  facts

The Margin Scheme, which is an optional VAT simplification scheme, operates by allowing taxable dealers to pay output VAT on the difference between the sales price and the purchase price of qualifying second-hand goods.  

The appeal at hand concerns the application of the Margin Scheme to second-hand goods acquired by the Appellant from a UK located Supplier on foot of the UK’s departure from the EU in 2021. Pre Brexit, such goods were dispatched by the Supplier to the Appellant from Great Britain. However, post Brexit, it was claimed by the Appellant that such goods were dispatched from Northern Ireland, where the Supplier set up a distribution hub to allow it to continue to trade within the EU and operate the Margin Scheme post Brexit.  

As part of the Revenue audit, which commenced in 2019, and subsequent appeal to TAC, the Appellant submitted multiple versions of supporting documentation (which included invoices and proof of delivery), with some documents showing conflicting evidence that the goods came from Great Britain. It was deemed by the Appeal Commissioner that the evidence provided was not sufficient to enable it to determine with certainty where the goods were dispatched from.  

When applying the margin scheme on its onward supplies of the goods during 2021 and 2022, the Appellant relied on invoices received from the Supplier which noted “Second-hand goods sold under Vat Margin Scheme” as well as referencing the Supplier’s XI EORI number.

 The initial set of invoices shared also appears to indicate the Supplier was located in Great Britain and not Northern Ireland. In addition, the Appellant relied on assurances from the Supplier that it was registered for VAT in Northern Ireland but did not seek to verify the VAT registration status of the Supplier and instead, incorrectly took the view that as it held a valid XI EORI number, that it also held a valid XI VAT number.    

TAC decision  

On the basis that the Appellant could not demonstrate that the Supplier was registered for VAT in Northern Ireland during the period 1 January 2021 to 31 December 2022, TAC found that the Appellant was not entitled to operate the Margin Scheme on its onward supply of the goods, even where it could be proven that the goods were dispatched from Northern Ireland. Output VAT at the standard rate, currently 23%, was deemed to apply to the onward supply as assessed on the Appellant.  

TAC held that the onus lies on the Appellant to evidence that it took “every reasonable measure in [its] power” to satisfy itself that the Supplier was registered for VAT in Northern Ireland and that there was an entitlement to apply the Margin Scheme.  

Practical implications  

The burden of proof rests with the taxpayer to demonstrate it has complied with the requirements to have the entitlement to operate the Margin Scheme on second hand goods. This includes confirming:  

1. The goods are dispatched from the EU;  
2. The supplier of the goods holds a valid EU VAT registration at the time of the supply; and
3. The taxpayer took all reasonable steps to confirm the VAT status of the supplier on receipt of supporting documentation/invoices.  

Taxpayers should review its supply chain to ensure it can evidence the entitlement to apply the Margin Scheme in respect of its supply chain.

It is also important that robust controls are in place to ensure invoices meet the relevant criteria for being valid VAT invoices, and in particular evidence the correct application of the Margin Scheme (i.e. valid EU VAT number, address, and reference to the Margin Scheme being applied).  

Overview  

TAC determination 21TACD2026 relates to an appeal made to TAC by an Irish company (“the Appellant”) against Revenue’s refusal to grant it an Irish VAT registration. In April 2024, the Appellant applied for a VAT registration which was refused by Revenue on the basis that the Appellant was not an accountable person. The Appellant submitted a second application in January 2025 which was also refused by Revenue for the same reason. In April 2025 the Appellant appealed against the refusal to TAC. TAC determined that the Appellant was an accountable person and that Revenue was incorrect to refuse the VAT registration. The Appellant was subsequently granted a VAT registration.  

Background facts  

The Appellant is an Irish company and a subsidiary of its UK parent company. The parent company’s business in Europe suffered post-Brexit leading it to establish an Irish entity. The business intention is that the Appellant would place orders with the UK parent company, the goods would be shipped to Ireland from the UK and then on to European customers. Based on the activities of the Appellant (i.e. making B2B intra-community supplies (“ICS”) of goods out of Ireland), an obligation to register for VAT exists.  

As part of the registration applications, a multitude of documentation was provided to Revenue to substantiate the Appellant’s intention to trade in Ireland. Based on the information provided to them, Revenue was not satisfied that the Appellant was trading or had the capacity to trade in Ireland. As such, Revenue determined that the Appellant was not an accountable person and was denied VAT registration on both occasions. Reasons for the refusal include;  

• The Appellant was managed and controlled outside of Ireland and that the Directors were not resident in Ireland.  
• There were insufficient human resources to conduct business in Ireland.  
• There was no evidence of rental payments being made in relation to the lease of a premises in Ireland.  
• There was no evidence provided of goods being in Ireland for onward distribution to other EU countries.  

TAC decision  

TAC found that the Appellant has demonstrated a capacity to trade in Ireland for the following reasons;  

• The Appellant developed a European website in order to attract EU customers.  
• The Appellant furnished evidence of a lease agreement in relation to a premises in Ireland.  
• The Appellant evidenced that an agreement was in place to utilise an employee of its parent company to manage operations in Ireland.  
• The Appellant submitted evidence that it has supplied goods to a customer in Europe in the form of invoices addressed to a customer in Spain.  

TAC found that where Revenue concluded that the VAT registration applications do not demonstrate that the Appellant has the technical and human resources to conduct business in Ireland was not relevant as an obligation to register for VAT arises due to the fact that the Appellant is making B2B ICS of goods.  

As such, TAC was satisfied that the Appellant had submitted sufficient evidence of the supply of taxable goods from Ireland to another EU member state and, therefore, was satisfied that the Appellant had adequately demonstrated its capacity to trade in Ireland.   

Practical implications  

• VAT registrations are increasingly more cumbersome to obtain in terms of the quantum of information required by Revenue and the length of time is takes for the application to be approved.  
• The onus is on the VAT registration applicant to substantiate clearly to Revenue that it is an accountable person and, as such, is required or entitled to register for Irish VAT. What was once a more straightforward process has now become significantly more challenging.  
• To prevent delays and potential trade disruptions, VAT registration applicants should have sufficient documentation/evidence to hand to substantiate trading intentions in Ireland (e.g. service agreements, functional website, lease agreements, employee contracts, customer details, etc).  
• VAT registration applicants should seek the support of professional VAT advisors to assist with the VAT registration application process and to assist with queries Revenue are more than likely going to raise following the submission of the application.   

The CJEU held that a taxpayer may deduct VAT in the VAT period in which it made the purchase, where the purchase was made with regard to the economic activities of the taxpayer, even where the taxpayer did not receive a VAT invoice during the period in which the reclaim relates. To disallow the entitlement to reclaim the VAT would not align with the principles of VAT neutrality and proportionality.  

Background

I.S.A. (“the Company”), a Polish VAT registered company, operates a clearing and settlement house for stock exchange transactions involving gas and electricity. In the course of its activities, it acts as both a purchaser and reseller of the goods and therefore accounts for both input and output VAT. In certain instances, the Company received purchase invoices after the VAT period in which the supplies were made, but before submitting its VAT return for that earlier period.

The Company sought advance ruling from the Polish Tax Authorities (“PTA”) to confirm whether it was entitled to deduct input VAT on purchases in the VAT return period in which the purchase was made, even if the underlying invoice was received in the following VAT period but before the filing deadline of the VAT return for that earlier period.

The PTA were of the view that under national Polish law, the Company could not deduct input VAT on the basis that it had not physically received the invoice during that period in which the VAT became chargeable, even if the invoice was received before filing the VAT return for that period.

CJEU decision

The CJEU held that the entitlement to VAT recovery is an integral part of the VAT system and should not be restricted where some of the formal requirements (i.e. holding of an invoice) are not met, provided the substantive requirements (i.e. the cost was incurred by a taxpayer in carrying out its economic activities) are met. The right to deduct VAT arises when the tax becomes chargeable – that is when the goods/services are supplied.    

The CJEU emphasised that the right to VAT deduction is a fundamental principle of the VAT system and that the principle of fiscal neutrality provides that the taxpayer is relieved of the VAT it paid in the course of its taxable activities.  

Delaying deduction where the invoice is available before filing the return forces the taxable person to temporarily bear the VAT cost which breaches fiscal neutrality.

The taxpayer should not be prevented or delayed from deducting input VAT due to non-compliance with formal requirements such as invoicing and maintaining accounts that can be remedied before filing the VAT return.

Practical implications  

In Ireland, VAT becomes payable on the date the supply is made or when payment for the supply is made where an invoice has not been issued. For example, for supplies received in April 2026, VAT should be paid in the March/April 2026 VAT return. Where an invoice is received before the filing deadline for that period, i.e. 23 May 2026, a simultaneous deduction may be made in the same return.

The holding of an invoice remains a condition for exercising the right to deduction and should still be available before the submission of the VAT return in order to reclaim the VAT.

To support VAT reclaims, businesses should ensure that they:

• Document the timing of supplies received and payments made,  
• Retain evidence that invoices were received before the submission of the VAT return in which the supplies were received, and
• Are able to demonstrate that the purchases are directly linked to its taxable activities.

In addition, a statutory time period of four years applies under which a taxpayer can amened a VAT return in order to reclaim VAT incurred but was not previously reclaimed.  

We are seeing in practice, that in the event of reclaiming VAT on historic input invoices, Revenue require the VAT return for the period in which the invoice is dated to be amended and it is not sufficient to reclaim historic VAT in the current VAT period, even where within the four year statutory look back period. Where amended returns are filed and an additional input credit arises, Revenue may seek to query the basis for this refund and it is therefore important that sufficient support documentation is held to evidence the entitlement to VAT recovery both from a substantive and formal perspective.  

The CJEU held that providing an incorrect VAT number in respect of an intra-Community acquisition (“ICA”) can give rise to double taxation, in particular in scenarios where an incorrect invoice is issued showing domestic VAT being charged on intra-Community supplies (“ICS”). The CJEU further noted that in order to preserve fiscal neutrality, incorrect invoices can be corrected, and taxpayers should not be left at a disadvantage.   

Background

D GmbH (“D”), an Austrian company, purchased goods from an Austrian supplier but the goods were delivered to other EU Member States. D shared its Austrian VAT number with the suppliers. The suppliers issued its invoices to D with Austrian VAT. When submitting its VAT returns, D took the view that the Austrian VAT charged to it was deductible and that it had not made an ICA which was taxable in Austria.  

During a tax audit, the Austrian Tax Authority (“ATA”) deemed that D had made an ICA in Austria on the basis that the place of supply shall be the Member State which issued the VAT number, unless the purchaser of the goods can prove that VAT has been applied in the Member State in which the dispatch or transportation ends (as per Article 41 of the EU VAT Directive). D had not proven VAT had been accounted for in the Member States of destination of the goods.  

In addition, the ATA held that as the suppliers had incorrectly invoiced Austrain VAT, this VAT was due to the ATA (per Article 203 of the EU VAT Directive), but D was denied the right to deduct that VAT on the basis the VAT was incorrectly charged.

Court’s decision

The Court confirmed that the principle of fiscal neutrality provides that an ICS should be exempt from VAT and should instead be taxed in the Member State of arrival or where the VAT number provided was issued. Therefore, D was deemed to have made an ICA of goods in Austria, notwithstanding that the Member State of departure in the first instance was also Austria.

The Court also agreed that the supplier had incorrectly charged domestic VAT and by doing so, had become liable to VAT. It added that the supplier incorrectly charging VAT did not preclude D from treating the purchase as an ICA and that both Article 41 and Article 203 of the VAT Directive can apply simultaneously in respect of ICAs where the conditions for their application are satisfied.

Therefore, both the supplier and purchaser were liable to VAT by virtue of: 

1.  The supplier incorrectly charging VAT; and
2. D having made an ICA.

However, with regard to the principles of VAT neutrality and proportionality, measures adopted by Member States to ensure the correct collection of VAT and prevent tax evasion, should not go further than is necessary to achieve such objectives and should not undermine VAT neutrality. In particular, the CJEU noted that in instances where VAT has been incorrectly charged by a supplier, tax authorities should allow for corrections to be made by the supplier. In addition, the purchaser should have an entitlement to reclaim any VAT incorrectly paid by it to suppliers and where reclaiming such VAT may  be onerous on the purchaser (e.g. due to a supplier’s insolvency), tax payers should have an entitlement to reclaim such VAT directly from the tax authority, even if a reclaim would otherwise be statutory time barred.    

Practical implications

While this case concerns transactions which pre-date the introduction of the 2020 “Quick Fixes”, it nevertheless illustrates the importance of ensuring the correct administrative procedures are applied from a VAT perspective when engaging in cross-border trade. This includes ensuring use of the correct VAT numbers, accurate invoicing and self-accounting for VAT as appropriate in respect of EU trade. This may also include registering for VAT in another EU Member State (as required).  

From a supplier perspective, obtaining and validating VAT numbers as well carrying out customer KYC and due diligence procedures ensures the supplier mitigates the necessity to charge domestic VAT. 

The CJEU held that services such as breakfast, car parking, Wi-Fi and gym facilities can be taxed at the standard rate of VAT, even where such supplies are ancillary to the principal supply of short-term accommodation which is subject to VAT at the reduced rate, even where these services form part of a single supply and are included in one flat price. 

Background

This case, which was brought by three German entities, questions whether national German law is compliant with the EU VAT directive on the basis German law excludes supplies which are not directly used for short-term accommodation (e.g. breakfast, car parking, gym facilities, etc.) from falling within the scope of the reduced VAT rate which applies to the provision of short-term accommodation, even where such supplies should be considered ancillary to the main supply by virtue of the facts that a single flat-rate price is charged.  

J‑GmbH operated a hotel and restaurant with an onsite car park. The supply of accommodation included breakfast, but guests had the option of forgoing the breakfast for a reduced fee. The car park was available for use by guests at no additional cost. J‑GmbH applied the reduced rate of VAT to the entire package. Following a tax audit, the tax authority held that breakfast and parking were required to be separated from the accommodation service and taxed at the standard rate of VAT.

D operated a guesthouse which also included breakfast for guests which was included in the flat-rate overall price, regardless of whether guests availed of the breakfast. During 2013, D had applied separate VAT rates to the short-term accommodation and breakfast elements of the supply. However, a subsequent request was submitted to the tax authority in 2018 to request that the reduced rate be applied on the basis a single supply was being made but this request was rejected.  

D GmbH & Co. KG operated two hotels with car parking, Wi-Fi and gym facilities which could be used by guests without an additional charge. D GmbH & Co. KG submitted a VAT return to the tax authority in which it claimed that the supply should be subject to VAT at the reduced rate on the basis there was a single supply of short-term accommodation with additional ancillary services.  

CJEU decision

The CJEU held that EU VAT law does not prevent national German VAT legislation from applying different VAT rates to accommodation and ancillary services even where these services form part of a single economic supply with the accommodation and are included in a single overall price. This is on the basis that national German VAT law precisely defines what forms part of accommodation subject to the reduced rate and what must be excluded.  

German law specifically excluded such ancillary supplies from falling within the scope of the reduce VAT rate applicable to short-term accommodation, therefore ensuring that the principle of fiscal neutrality is preserved.  

Practical implications

Hotels operators should not assume that all elements included in a composite accommodation package qualify for the reduced VAT rate. Member States may restrict the reduced rate to the core accommodation element only.  

Ancillary items such as parking, breakfast, Wi‑Fi, or wellness facilities may be taxed at the standard rate where national law so provides.  

VAT neutrality is respected where equivalent services provided independently are also subject to the standard rate.