Labour expenses incurred by the head office that are wholly or partly allocated to a branch established in another state, may have an effect on the international tax position of employees working for that branch. However, this may also trigger VAT consequences. Based on EU case law, since 17 September 2014 this interaction is subject to VAT when the branch is part of an EU VAT group. In the Member State where the branch is established the “reverse charge” mechanism applies. EU case law has retroactive effect, so VAT is due on expenses that were allocated in the past as well. It is uncertain if VAT is due when the head office is part of such a VAT group instead of its branch. We advise companies to investigate their VAT position, in particular the allocation of labour and other expenses between head office and branch, as well as their fiscal unities in the group.