RSM Ireland VAT newsletter - Winter 2025

Cross-border intra-company supplies between head office and branches will no longer be outside the scope of VAT under the Irish Revenue’s position on VAT grouping rules.

Irish Revenue have updated Irish VAT grouping rules to align with CJEU case law, effective 19 November 2025.

By way of background, Ireland has historically applied the singe-entity approach with respect to supplies between head office and branch meaning that any intra-company supplies were not liable to VAT on the basis that they form a single legal entity. From a VAT group perspective, where an Irish establishment joined a local VAT group, it was the entire legal entity that became a member, including any foreign branches or head office.

Under the Irish Revenue’s updated position, only a head office or branch established in Ireland can be a member of an Irish VAT group. Any foreign branches or head office may not be brought into an Irish VAT group under the single entity approach rendering any supplies between head office and branches (despite being a single legal entity) subject to normal VAT rules.

This new position takes immediate effect from 19 November 2025 and a transitional period until 31 December 2026 has been granted for any existing Irish VAT groups impacted by this change.

Businesses with both Irish and non-Irish establishments are now advised to review its intra-group transactions from a VAT perspective and consider any mitigation steps with the view preserving the single-entity approach – particularly those in the financial services sector, such as disbanding an Irish VAT group (although this will need to be considered as part of wider commercial decisions).

This significant development in Irish VAT policy aligns Ireland with several EU Member States who have already limited the territorial scope of VAT groups.

You can read our full analysis here.

Effective from 1 July 2030, businesses engaging in EU cross-border transactions will be required to shift from paper invoicing to e-invoicing and comply with real-time digital reporting to EU tax authorities. Under ViDA, businesses will be required to issue an e-invoice in an EU wide structured format.  

Following the Budget 2026 announcement on 7 October 2025, Revenue published its phased implementation approach to e-invoicing in Ireland on 8 October 2025.

Read the full update here on our website.

As announced in October’s Budget, the VAT rate applicable to the sale of completed apartments has been reduced to 9%. This reduction from 13.5% is effective from 8 October 2025 and applies until 31 December 2030.

Section 70 of the Finance Bill 2025 introduced the following:

1. From 8 October 2025 to 25 November 2025, the 9% rate applies to the supply of apartments; and
2. From 26 November 2025 to 31 December 2030, the 9% rate applies to the supply and development of apartments and apartment blocks.

The 9% rate will also apply to related site sales where a dual contract exists for the purchase of the site for construction of apartments. Additionally, the 9% will apply to purpose-built student accommodation and approved hosing bodies.

For more information on RSM’s Budget 2026 insights and post Finance Bill 2025 reflections, please click here. 

Revenue, in recent years, focused its attention on the employed vs self-employed workers debate, most notably in the recent Supreme Court decision of Karshan (Midlands) Ltd t/a Dominos Pizza (Karshan).

From a VAT perspective, whether someone is employed or self-employed has obvious implications, a self-employed worker would be obliged to charge VAT whereas an employee would not. Within the medical sector in particular, the implications potentially give rise to a VAT cost for businesses engaged in VAT exempt medical activities.

The presence of locums within a number of medical fields is becoming more and more prevalent and is a term used to cover a wide range of roles, and in some instances, to describe non-permanent roles.

Within dental practices in particular, it is relatively common for a number of dentists to operate as dental associates within a practice that is owned and operated by a principal (or a small number of principals). Such dental associates carry out normal dental services using the facilities and infrastructure of the principal(s). Generally, a revenue and cost sharing arrangement is in place between the principal(s) and the associates operating within the practice. Consideration should be given in such scenarios as to whether the dental associate is an employee of the practice, or whether they are providing services to the practice as a self-employed dentist. As well as the VAT implications, the employment tax implications should be considered using the five-step decision making framework as set out in Karshan.

We are also seeing more frequently scenarios where locum doctors or other practitioners are operating via a limited company and providing services either to the end-user directly or to a third party who has the patient relationship. Revenue have clarified in its recent updated guidance, TDM 05-05-20 - Individuals described as 'locums' engaged in the fields of medicine, health care, pharmacy and 'dental associates' engaged in the field of dentistry, that the provision of staff via an intermediary or limited company should be subject to VAT at the standard rate, currently 23%. As such, albeit VAT exemption would apply in scenarios where the medical services are provided by the practitioner directly to the end patient, given the involvement of the intermediary or limited company, such services are now brought within the VAT net, thus giving rise to a potential VAT cost for medical practitioners acquiring locums services where a VAT recovery entitlement does not exist. 

Revenue have clarified in its new Tax and Duty Manual, VAT Deductibility for Insurance & Reinsurance, issued in December 2025 that the supply of insurance (including life and non-life) and reinsurance to EU policyholders is VAT exempt and that normal VAT deductibility and apportionment rules apply to businesses in this sector.

Revenue have confirmed the following principles:

• VAT incurred on costs directly in connection with EU policyholders may not be recovered.
• Supplies of insurance and reinsurance to non-EU policyholders is a ‘qualifying activity’ whereby any VAT incurred on direct costs can be recovered.
• For VAT on general overhead costs, an apportionment of VAT recovery entitlement will be needed and calculated in accordance with normal apportionment rules.

For insurance companies dealing in shares, similar principles apply:

• VAT on costs directly in connection with Irish and EU investment activity is not recoverable.
• VAT on costs directly in connection with non-EU investment activity is recoverable.
• VAT on general overhead costs should be apportioned in line with normal apportionment rules.

Practical implications

It is important for businesses engaged in a mix of exempt and qualifying activities to undertake a recovery rate exercise to ensure that VAT recovery is applied appropriately and is maximised. Businesses that have been applying an ‘estimated’ recovery rate for its current financial year are reminded to perform a mandatory annual recovery rate review and adjustment within three bi-monthly periods after following its year end. 

Generally, where certain goods are supplied (e.g. furniture, IT equipment or household electrical goods), the customer has the option to purchase an extension of the standard manufacturer’s warranty.

Revenue have confirmed in its new Tax and Duty Manual, VAT Treatment of Extended Warranties, issued in December 2025 that the supply of an extended warranty is a supply of an exempt insurance product to the extent the provider agrees to repair/replace a product in exchange for a premium when the risk covered under the extended warranty materialises.

Retailers are advised to consider the impact of supplying extended warranties, particularly from a VAT recovery perspective.

The CJEU’s recent decision in SC Arcomet Towercranes SRL follows the CJEU decision in Högkullen AB which was released earlier in the year. Both cases consider the VAT treatment of intra-company transfer pricing adjustments as well as the supporting documentation which can be requested by a tax authority.

While you can read our full analysis of both cases here , we have set out below a summary of the practical implications to be considered.

Practical implications

Under intra-EU transfer pricing arrangements, assuming certain risks and responsibilities on behalf of an associated company should constitute a service for VAT purposes. This requires the associated company receiving the service to self-account for VAT. The CJEU’s decisions clarify that services supplied by a parent company to its subsidiaries should be assessed individually given each separate service has its own individual and identifiable character, even where a single fee is charged for all services.

Both cases highlight the importance of intercompany agreements as well as the interaction between VAT and transfer pricing arrangements and the complexities and challenges which may arise. This is particularly important in scenarios where the recipient of a supply may not have full VAT deductibility entitlements.

Contracts between the parties should be sufficiently detailed and clearly note the detail and nature of the services being provided. In addition, payment terms should also be specific enough such that they can include reciprocal performance.

The burden of proof to demonstrate deduction entitlement sits with the taxpayer making the claim and tax authorities are entitled to request additional evidence to demonstrate the entitlement to VAT deductibility where it is necessary and proportionate. This means that in the event of scrutiny from the tax authorities, it is important to maintain supporting documentation to prove that the service was used for taxable activities, e.g. transfer pricing agreements, evidence of economic activity – particularly for holding companies.

The decisions in both Arcomet Towercranes and Högkullen act as a timely reminder for businesses of the close ties between VAT and transfer pricing. Businesses should review its transfer pricing policies and intra-group agreements to ensure any VAT implications are sufficiently considered and correctly applied.  

A VAT refund cannot be refused simply because the goods did not leave the EU Member State, and the supply of tooling should be treated as a separate taxable transaction.

Brose Prievidza spol. s r.o., (Brose SK) a Slovak Company, sought a VAT refund in respect of Bulgarian VAT charged to it on tools purchased from Brose DE (Brose DE) a German entity, where the tools remained in Bulgaria for manufacturing components. The Bulgarian Tax Authorities (BTA) denied the VAT refund, classifying the transaction as an exempt intra-Community supply (ICS).

Background

A Bulgarian Supplier (IME Bulgaria) manufactured automative components on behalf of Brose SK, which were then dispatched from Bulgaria to Slovakia by way of an ICS. As part of the manufacturing process, IME Bulgaria used specialised tooling equipment, which had been ordered by Brose DE for integration into the final automative component.

Although the tools were legally owned by Brose DE, they were exclusively used as part of the manufacturing of the components on behalf of Brose SK. The specialised equipment remained in Bulgaria at all times and as part of a subsequent supply by Brose DE to Brose SK in Bulgaria, Bulgarian VAT was charged.

Brose SK applied for a refund of the Bulgarian VAT it had paid. However, the BTA refused the refund on the grounds that the supply of the tooling was, in their view, part of an ancillary ICS of goods. Therefore, the view of the BTA was that local Bulgarian VAT should not have been applied on the supply between Brose DE and Brose SK.

CJEU decision

In its decision, the CJEU noted that the fact that the tooling did not leave Bulgaria does not conclude the right to a refund of the VAT charged, unless the supply is regarded as a single, indivisible economic supply or an ancillary supply to the principal supply of the goods dispatched to another member state.

In this case, the Court found that the tooling and component supplies were independent transactions carried out by different suppliers. Albeit the tools were used within components which were ultimately dispatched to another EU Member State, the tooling had its own economic significance, as Brose SK acquired ownership while the tools remained in Bulgaria for exclusive use in production, and could not be automatically treated as being ancillary to the end supply of completed goods. As the tooling was not transported to another EU Member State, the conditions for an ICS were not met as the goods were not dispatched/transported.

Practical implications

• Physical transport/dispatch is required for a supply to be regarded as an ICS.
• The decision reinforces the need to document contracts, ownership, and supply chains to prove the independence of each transaction.
• Businesses seeking to reclaim foreign VAT via an EVR reclaim should expect queries from the EU Member State receiving the EVR claim.

The CJEU clarifies the VAT treatment of online purchases via app stores.

This case concerns a German mobile game developer (developer) distributing apps via an Irish app store platform (the marketplace) between 2012 and 2014. Customers were able to download game applications via the marketplace developed by the German developer. When the applications were made available to the developer, the developer’s company name, legal form, and address were displayed.

While downloads were free, users paid for in-app purchases through the platform which enhanced the initial free download. However, the developer’s name was not presented in the course of these transactions and only the marketplace’s logo was shown. It was only after the end customer had purchased the download did it receive an order confirmation from the marketplace, bearing the marketplace’s logo but noting the purchase was from the German developer.  

The developer deemed itself as the supplier and therefore charged German VAT to its customers on the basis that the place of supply was Germany but later argued that the marketplace should be deemed the supplier, making Ireland the place of supply. The German tax authority rejected this correction on the grounds that the marketplace merely acts an intermediary.  

Questions referred to the CJEU

1. Should an online marketplace be deemed as a supplier where it is supplying and receiving services on behalf of an app developer?
2. If so, how should the place of supply of a “fictitious” supply by the developer to the marketplace be determined?
3. If the developer did not make a supply in Germany i.e., not taxable in Germany under the general rules because of the above, can German VAT still be recovered from the developer simply because the app-store’s billing/confirmation showed German VAT and named the developer as supplier?

CJEU decision

In relation to the first question, the marketplace is deemed to be the supplier of the services notwithstanding that the order confirmations indicated that the developer was the supplier and that German VAT was charged in line with the developer being established in Germany. While the decision clarifies the scope of Article 28 of the EU VAT Directive, the CJEU remitted the matter to the referring court to examine the facts to decide whether Article 28 applied to the supply of in app purchases. 

In answering to the second questions, the CJEU held that where Article 28 applies, then the first fictitious supply, i.e. from developer to marketplace is a supply to a taxable person, the place of supply is where the recipient is established. In the facts, that means the effective place of supply for the developer’s first leg is Ireland (where the app-store operator is established) rather than Germany.

On Question 3, the CJEU held that Article 203 of the EU VAT Directive, which makes a person liable who “enters the VAT on an invoice” cannot be applied in a scenario where the recipient is a non-taxable person and thus has no right to deduct input VAT. In such cases, there is no risk of tax revenue loss that Article 203 is designed to combat accordingly, Article 203 cannot be used to impose German VAT liability on the developer.  

Practical implications

The ruling confirms the scope of deemed supplier rules in respect of services supplied through app stores. It clarifies that operators of online marketplaces are deemed to be suppliers in respect of services supplied through its marketplace where they act in their own and control key aspects of the transaction.

This provides certainty for developers, platforms, and tax authorities on VAT liability and the location of taxable supplies, particularly for pre-2015 periods. Whether such rules apply should be determined by examining the actual business arrangements, including contractual terms and the platform’s role in pricing, payment, and delivery. 

Furthermore, the case confirms that the initial supply from the developer to the marketplace should follow normal B2B place of supply rules.