Irish Revenue has updated its VAT Tax and Duty Manual on the VAT Treatment of Debt Factoring and Invoice Discounting through eBrief 093/26, incorporating changes linked to the CJEU judgment in Case C-232/24 (Kosmiro).
Irish Revenue published eBrief 093/26 on 20 May 2026, updating the VAT Tax and Duty Manual on the VAT Treatment of Debt Factoring and Invoice Discounting.
The update revises paragraphs 5 and Appendix 1 to reflect the CJEU judgment in Case C-232/24 (Kosmiro), with the amended guidance applying from the date of publication.
The VAT Tax and Duty Manual on the VAT Treatment of Debt Factoring and Invoice Discounting has been updated (amendments to paragraph 5 and Appendix 1) to reflect the CJEU judgement in Case C-232/24 (Kosmiro). The updated TDM has effect from the date of publication.
The following is a detailed summary of the Irish VAT treatment of debt factoring and invoice discounting as outlined in the source material:
Definitions and core concepts
- Debt Factoring: A financial service where a financier purchases debts from a client (assignment), notifies the debtors, collects the debts, and provides advance funding.
- Invoice Discounting: This involves the assignment of debt to a financier, but the client continues to collect the debt as an agent of the financier.
- Recourse: In “with recourse” agreements, the client retains the risk of debtor default; in “without recourse” agreements, the financier assumes that risk.
VAT treatment of services
- Standard rate VAT: Debt factoring and invoice discounting services are generally subject to VAT at the standard rate. This is because they are considered a single supply of debt-collection services.
- Ancillary services: Any services provided as part of a debt factoring or invoice discounting agreement—including financing or advancing funds—are also subject to VAT at the standard rate.
- Exemptions:
- The sale of debts or non-performing loans by a client to a financier is VAT exempt.
- Separate supplies of financing or granting credit (distinct from the factoring/discounting service) are VAT exempt.
- Non-Supplies: The acquisition of debts by a financier at a price below their face value is not considered a supply for VAT purposes.
VAT deductibility
- Financier: A financier can recover VAT on costs related to taxable activities (like factoring) but cannot recover VAT on costs related to exempt supplies (like separate credit provision). VAT on general overheads must be apportioned.
- Client: A client who is an accountable person is entitled to deduct the VAT charged by the financier under normal VAT rules.
VAT treatment of specific fees
The source provides a breakdown of how common fees are treated:
- Standard rate (taxable):
- Take-on Fees: For verifying ledgers and setting up accounts.
- Arrangement Fees: If charged as part of the factoring/discounting service.
- Computerised Services: Fees for software or electronic data interchange.
- Collect-out Fees: Charged upon client breach or insolvency for extra collection work.
- Outside Visit Costs: Charges for visiting the client’s premises.
- Legal Fees and Debt Enforcement: Costs related to perfecting security or enforcing rights.
- Credit Status Reports: Providing reports on a client’s customers.
- VAT exempt:
- Arrangement Fees for Credit: If the fee is specifically for negotiating the terms of a credit facility.
- Facility Fees: Normally exempt if they relate specifically to the provision of financial facilities.
- Case-by-Case: General Indemnities (often for out-of-pocket expenses or damages) must be evaluated individually to determine the correct VAT treatment.
