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2013 - 2020 Archive
Bringing you the latest news on VAT
Input is your Deloitte guide to everything related to VAT in Luxembourg.
Refund of VAT to foreign taxable persons: the Court of Justice of the European Union condemns Germany in two cases
In two recent cases, the Court of Justice of the European Union (CJEU) has ruled that Germany violated the European VAT law by systematically refusing—for purely formal reasons—to refund German VAT to foreign taxable persons.
Right to deduct VAT on “aborted deal” costs of holding company: Balanced decision of the Court of Justice of the European Union in the case C-42/19
On 12 November 2020, the Court of Justice of the European Union (CJEU) issued its ruling in case C-42/19. This concerns an “active” holding company (i.e., a holding company that actively intervenes in the management of its subsidiaries) that had incurred VAT on costs regarding a potential acquisition of shares in another company that eventually did not materialize (“aborted deal” costs).
CJEU rules that investment management services supplied for an occupational pension scheme cannot classify and be VAT exempt as ‘insurance transactions’ for VAT purposes
On 8 October 2020, the Court of Justice of the European Union (CJEU) ruled in the “United Biscuits” (C-235/19) case that investment management services supplied for an occupational pension scheme cannot be classified as ‘insurance transactions’ under the EU VAT directive despite these services being included in the EU insurance directives.
CJEU’s preliminary VAT ruling on the provision of vehicles by Luxembourg employers to staff members residing abroad: Advocate General’s opinion (C-288/19)
Should providing vehicles to staff members be considered as a “hiring of a means of transport to a nontaxable person”? And, where should these services be taxed for VAT purposes: in the employer’s or the employee’s Member State?
Payment due on the early termination of contract: Remuneration for a supply subject to VAT or out-of-scope indemnity? Decision on the case C-43/19
On 11 June 2020, the Court of Justice of the European Union (Court) ruled in the Vodafone Portugal case (C-43/19) that the amounts received by an economic operator for the early termination of a services contract, which has a tie-in period in exchange for advantageous commercial conditions for the customer, constitute the remuneration for a supply of services for consideration that are subject to VAT, and are not considered as indemnities out of the scope of VAT.
Decision of the Court of Justice of the European Union on the Blackrock case
A service used for both funds eligible to receive VAT exempt management services and other funds is not specific to the fund management activity and, therefore, could not be VAT exempt as fund management services.
VAT: Supply of staff is subject to VAT even if without profit
A recent decision (“San Domenico Vetraria Spa”, 11 March 2020, C-94/19) of the Court of Justice of the European Union confirmed that the supply of staff is subject to VAT. Whether the remuneration of the service is limited to the reimbursement of the supplier’s costs is irrelevant. Concerned persons should consider all relevant facts and legal rules.
Dong Yang – The Court of Justice of the European Union provides useful guidelines for service providers helping them to determine who the beneficiary of their services is
In its Dong Yang case (C 547/18, 7 May 2020), the Court provides useful guidelines to help service providers determine who their contracting party is and confirms the predominance of the client’s seat of economic activity on it(s) fixed establishment(s).
Right to deduct of holding company: Opinion of the Advocate General in the case C-42/19
On 14 May 2020 , the Advocate General of the Court of Justice of the European Union (CJEU), Mrs. Kokott, delivered her opinion on the case C-42/19 regarding the right to deduct of a holding company.
UK announces post-Brexit customs tariff
The UK government recently published the standard customs import tariff that will replace the European Union’s (EU) tariff after the transition period ends, which is scheduled to be 1 January 2021 but could potentially be extended by one or two years.
Luxembourg VAT authorities revoke the tolerance for the late filing of VAT returns justified by COVID-19
On 12 May 2020, the Luxembourg VAT authorities announced that they revoke the tolerance for the late filing of VAT returns justified by COVID-19 and that taxpayers should file missing VAT returns within a short delay.
From 2024, new record keeping and reporting obligations imposed on EU payment services providers to fight against VAT fraud
In February 2020, the European Union Council has approved new measures (Directive and Regulation) imposing on payment services providers (PSPs) to collect and report data regarding cross-border payments as from 2024.
VAT on management services of investment funds: Opinion of the Advocate General in the important Blackrock case
On 11 March 2020, the Advocate General of the Court of Justice of the European Union (CJEU) delivered his opinion on the case Blackrock Investment Management UK Ltd (C-231/19).
Brexit: 11 months to get ready?
The UK should leave the EU on 31 January 2020. After 31 January 2020, the UK will enter a transitional period, which is due to end on the 31 December 2020. The first date could thus be qualified as the “political exit” date and the second date as the “effective exit” date. In theory, it is possible to extend this transitional period until either 31 December 2021 or 31 December 2022.
2020 VAT changes: understand the practical impact of the so-called “quick fixes”
On 1 January 2020, “quick fixes” that aim to simplify intra-EU goods transactions will enter in force. These quick fixes include a simplification regime for call-off stock and new rules regarding intra-EU supplies (proof of transport, increased importance of the purchaser’s VAT number, chain transactions).
VAT on company cars used by Luxembourg employees residing in Germany: question referred to the Court of Justice of the European Union
Many employees of Luxembourg employers are entitled to a company car as a part of their remuneration. This implies a fringe benefit subject to Luxembourg income tax and social security contributions and VAT.
Update on foreign VAT refund claims
On 2 May 2019, the Court of Justice of the European Union released a favorable decision for taxable persons claiming back VAT to a Member State where they are not established.
VAT deduction of branches
On 24 January 2019, the Court of Justice of the European Union (“the CJEU”) in the “Morgan Stanley” case (C-165/17) has confirmed that branches which incur VAT on expenses used wholly or partly for head office supplies, must consider the activity of the head office for the purposes of determining the branch VAT recovery calculation.
No deduction of VAT on costs linked to the sales of shares by holding companies
On 8 November 2018, the Court has ruled in its C&D Foods decision (C-502/17) that a holding company, which invoices services to its sub-subsidiary, could not deduct the VAT incurred on the intended sales of shares of its subsidiary and sub-subsidiary.
Deduction of VAT on aborted deal costs by holding companies
On 17 October 2018, the Court of Justice of the European Union (CJEU) ruled that a company could recover VAT on costs relating to an aborted acquisition of shares in another company to the extent that, based on objective elements, this company had the intention to provide management services subject to VAT to the acquired company (RyanAir, C-249/17).
Overview of the 2018 VAT changes in Luxembourg
The introduction of the VAT group regime by the law of 6 August 2018 is certainly the most important VAT change of the year.
VAT group law voted by the Luxembourg Parliament
As announced in our newsletter of 16 April 2018, the Luxembourg Parliament has voted on 26 July 2018 on the draft bill n°7278 to introduce the VAT group into Luxembourg legislation.
VAT group: draft bill lodged with the Parliament
On 16 April 2018 , the Luxembourg government has lodged with the Parliament the draft bill introducing the VAT group.
New VAT rules for online businesses
On 5 December 2017, the European Council adopted new VAT rules for online businesses. The new rules reinforce the taxation of goods and services in the country of the non-taxable customer and the use by the businesses of the mini “one-stop” shop (MOSS), i.e. a web portal existing in each EU member state. Additionally, the new rules align the treatment of goods and services purchased online and impose new obligations to online platforms.
VAT & Costs Sharing Exemption
On 21 September 2017, the Court of Justice of the European Union (CJEU) has delivered the rulings on three cases regarding “independent group of persons” (IGP) regime. This regime allows the sharing in a VAT free manner of services such as administrative, accounting or IT ones between persons who could not or only partly recover VAT on their costs. It is thus often used by the financial sector. These rulings substantially narrow the scope of the IGP and prohibit the financial sector to use it. It is therefore necessary that Luxembourg introduce the VAT group regime (unité TVA), already in use in several other Member States.
Independent Group of Persons: Decision of the Court of Justice of the European Union
On 4 May 2017, the Court of Justice of the European Union (the Court) rendered its judgement in Case C-274/15 European Commission v Luxembourg. In this judgement, the Court essentially upholds the infraction proceedings brought by the Commission against Luxembourg and declares that the Luxembourg legislative regime determining the application of the VAT exemption for independent groups of persons does not comply with the VAT Directive. The decision of the Court is in line with the conclusions of the Advocate General (AG) which were released on 6 October 2016.
Opinion of the Advocate General in Case C-650/16
The exemption for services supplied by an independent group of persons is not limited to the (para) medical sector.
The objective of this exemption is to prevent the application of VAT to supplies of shared services by an “independent group of persons” to its members, which would normally be unable, or only partially able, to deduct the VAT charged to them. In this way it enables the pooling of resources through a centralizing entity to be performed in a VAT neutral manner.
Status of Special Limited Partnership (SCSp) and its General Partner (GP)
On 8 February 2017, the Luxembourg Private Equity Association has released important communication regarding the VAT status of the Special Limited Partnership (SCSp) and its General Partner (GP).
Real estate changes as of 1 January 2017
EU regulation regarding the place of supply of services connected with immovable properties for VAT and the abolition of the obligation to register a rental agreement.
VAT changes as of 1 January 2017: increase of penalties and joint liability of persons in charge of management
The tax reform introduces substantial increases of penalties applicable in case of infringement of the VAT law. It also introduces a joint liability of the persons in charge of management. These changes are applicable as of 1 January 2017.
European Commission proposes changed VAT rules for e-Commerce
The European Commission published on 1 December 2016 its legislative proposal to drastically change the VAT rules for online sales of goods and services in Europe, over the 2018-2021 period.
The proposed rules still have to be adopted by the European Council, which is foreseen in the course of 2017, before they can be implemented on national level.
Independent Group of Persons: Opinion of the Advocate General of the Court of Justice of the European Union
The European Commission has raised a challenge toward Luxembourg’s transposition of the VAT exemption provided for services of independent group of persons (IGP) under Article 132(1)(f) of the EC VAT Directive 2006/112. This exemption is also often referred as the cost-sharing exemption.
Director fees: Circular of the Luxembourg VAT Authorities published
Luxembourg VAT is applicable on these services when they are located in Luxembourg by virtue of the place of supply rules. As a consequence, not only director services rendered by a Luxembourg director are subject to VAT (at the normal VAT rate of 17%) but it also means that VAT has to be self-assessed by each company considered as a taxable person and receiving such services from a non-Luxembourg director, based on the so-called reverse-charge mechanism.
Mandatory change of filing platform for VAT returns – eCDF
As from 1st January 2017, the use of the eCDF platform will be mandatory for the filing of periodic and annual VAT returns. The eCDF platform has been accessible for the filing of the VAT returns from the beginning of this year and throughout 2016 taxpayers have had the option to file their VAT returns either through the eCDF or through the eTVA platform. This option is not available in respect of EC Sales Lists, however, which can currently only be filed though the eTVA platform.
Director fees - 2016 VAT & TAX update
The Luxembourg VAT Authorities recently confirmed that Independent Director services fall within the scope of VAT. Therefore, it means that their services are VAT taxable (17%) if rendered to Luxembourg entities and if no VAT exemption applies. This position affects many Directors who considered (based on the market practice) that their services were “out of the scope” of VAT.
On 9 December 2015, the Court of Justice of the European Union (CJEU) delivered its decision in the Fiscale Eenheid X NV case (C-595/13) regarding the criteria to be used to determine whether certain entities and services are eligible for exemption from VAT as being services of management of investment funds1. In its decision, the Court only partly follows the conclusions of A.G. Kokott, as per her opinion released on 21 May 2015. This decision addresses the limits to the scope of the fund management exemption and may have a direct impact on how this VAT exemption is applied in practice.
1Article 135.1.g. of the EU VAT Directive 2006/112 implemented in article 44.1.d) of the Luxembourg VAT law
On 11th November 2015, the VAT Committee published guidelines regarding the VAT treatment applicable to crowdfunding transactions. Nowadays, crowdfunding is becoming more and more popular and it is often seen as a space of freedom, safe from the usual legal and tax rules applicable to more traditional funding, thanks to its “participative” character. Despite this perception, however, these legal and tax rules do remain applicable and the publication of the VAT Committee guidelines regarding crowdfunding on 11th November 2015 is a useful reminder of this.
On 22 October 2015, the Court of Justice of the European Union (CJEU) ruled in the Hedqvist case (C-264/14) that exchange of the virtual currency bitcoins for conventional currencies are VAT exempt. This decision ends uncertainties regarding the VAT regime, avoids substantial VAT costs, ensures a level playing field in the EU and waives a threat on the competiveness of the EU industry in this global activity.
CJEU ends reduced VAT rate on e-books - CJEU Case C-502/13
VAT exemption on the management of Funds – CJEU Case C-595/13
VAT rates for real estate as of 1 January 2015 – further guidance from the Luxembourg VAT authorities
Increase of the Luxembourg VAT rates as of 1 January 2015
ECJ Case : C–464/12 – ATP PensionServices A/S. Defined-contribution pension funds benefit from the VAT exemption on management services.
Increase of the standard VAT rate in Luxembourg - ECJ Case C-464/12 ATP PensionServices A/S - Summary of joined ECJ cases C 249/12 and C-250/12.
Circular no. 723 ter VAT and risk management services for investment funds.
Private use of company cars – the recent developments in the German VAT Law.