VAT Treatment of Negotiation Services

The Irish Revenue Commissioners (“Revenue”) published a Tax and Duty Manual entitled “VAT treatment of negotiation services in respect of financial services” (“TDM”) in March 2024. We understand that this manual was published to clarify the VAT treatment as a result of a number of queries being received by Revenue.

The TDM outlines Revenue’s current view as to what a “negotiation or agency” service is and the conditions which need to be satisfied to fall within the VAT exemption. In summary, please note the following:
 

• Merely describing a party as an “agent” or “intermediary” or a service as “agency” or “negotiation” is not sufficient.

• The nature of the service being provided and the relationship between the parties is key.

• A negotiation or agency service must consist of bringing together parties with a view to either “concluding a contract” or “negotiating a change to contract terms”.

• The agent or intermediary must:

  • Not be a party to the agreed or amended contract;

  • Do all that is necessary for the parties to enter into or amend a contract; and,

  • Provide more than the mere outsource of clerical or admin tasks.

• Negotiation is a distinct act of mediation which may consist of:

  • Pointing out to your client, as one of the parties to a contract, suitable opportunities for the conclusion of such a contract;

  • Making contact with another party; or,

  • Negotiating, in the name and on behalf of your client, the details of the payments to be made by either side.

  • Examples:

    • Stock, shares, debentures & other securities - Post a decision to effect a transaction, an adviser becomes actively involved in making the arrangements and has a clear and specific responsibility to carry out the negotiations essential towards bringing the deal to its conclusion.

    • Payments - Services consisting of the marketing, distribution, and sale of payment products, where the distributor is responsible for carrying out all tasks necessary to facilitate, negotiate and arrange the sale of the product to customers and arrange the incoming payment flows.

    • Debts - Services consisting of bringing together the credit provider and the debtor with a view to either concluding a contract or negotiating a change to the payment terms.

    • Credit - Services consisting of negotiation in relation to the granting of credit, regardless of whether any such transaction is finally concluded.

As you can see from the above summary, this is a very complex area of VAT law, and as with all VAT exemptions, they are to be interpreted narrowly. The TDM does provide, however, a very welcome insight into Revenue’s current view on the VAT treatment of negotiation and agency services in the context of financial services, particularly with respect to stocks, shares, debentures, securities, payments, debts, and credit. As this issue is extremely topical and as VAT is a transactional-based tax where errors can lead to substantial VAT liabilities, we would strongly recommend that affected businesses review their current activities to confirm whether the VAT treatment applied is in line with Revenue’s current view.


We are here to help, so please get in touch with us if you have any queries about the above-mentioned VAT treatment or wish to discuss the practical implications of this in more detail.