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Bringing you the latest news on VAT

Input is your Deloitte guide to everything related to VAT in Luxembourg.

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Keep yourself informed on the latest updates concerning tax, regulations, laws and directives.

Input - March 2021

Skandia reversed: the Danske Bank Case

In the Danske Bank Case (C-812/19), the Court of Justice of the European Union (the “CJEU” or the “Court”) has provided further clarity on the supply of services between a head office located in and belonging to a VAT group in one EU Member State, and a branch situated in another.

The CJEU’s decision (C-288/19) and Circular 807 of the Luxembourg VAT authorities on the provision of vehicles by employers to staff members residing abroad

Should the provision of vehicles to staff members be considered as “a hiring of a means of transport” to a non-taxable person? And, where should these services be taxed for VAT purposes: in the country of the employer or the employee?

Input - February 2021

European Commission review of the VAT rules for financial and insurance services

Why? Main issues? Possible solutions?

On February 8, 2021, the EU Commission launched a public consultation on its review of VAT exemptions applicable to financial and insurance services (VAT rules for financial and insurance services – review (europa.eu)).

Input - January 2021

German VAT: Non-resident suppliers may be obliged to register for VAT if they supply goods with installation in Germany

Traditionally, Germany did not require non-resident suppliers to register for VAT when supplying goods with installations to German VAT taxable persons, as the requirement to pay VAT was shifted to their customers.

Input - December 2020

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.

Input - November 2020

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).

Input - October 2020

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.

Input - September 2020

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? These are the two main questions the European Court of Justice (CJEU) must answer in this preliminary ruling.

Input - July 2020

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.

Input - June 2020

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. EU businesses selling goods to the UK should consider how these changes may affect their sales price. They should also prepare for how to deal with EU and UK customs formalities and how they may affect the delivery times of their products to the UK. Persons importing goods from the UK should also prepare for the possible application of EU customs duties.

Input - May 2020

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.

Input - March 2020

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. CESOP, a new database to be set up by the EU Commission, will keep record of this information regarding cross-border payments within the EU, as well as payments to third countries or territories. National tax authorities will have access to CESOP to control the correct fulfilment of VAT obligations, mainly but not exclusively, on cross-border business to consumer (B2C) supplies of goods and services.

Input - March 2020

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).

Input - January 2020

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.

Input - October 2019

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). Economic operators should consider the possible impact of these new rules on their business in order to mitigate VAT risks in terms of additional VAT liabilities, registration and reporting obligations.

Input - June 2019

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.

Input - May 2019

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.

Input - January 2019

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.

Input - November 2018

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. The Court bases its decision because the essential reason of the sale was to help the financial situation of the new proprietor of the company and on the absence of direct and immediate link of the VAT incurred with the taxable activities of the company. This decision contrasts with the recent decision RyanAir (C-249/17, 17 October 2018) where the Court accepted the deduction of the VAT incurred on costs related to an aborted acquisition of shares (see our input issued on 17 October 2018). It also diverges from the traditional holding jurisprudence. More importantly, the concept of “essential reason of the transaction” might further complicate the question of the VAT deduction for all taxpayers.

Input - October 2018

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). The decision of the Court is certainly an important evolution in its jurisprudence and should be examined with attention by Luxembourg holding companies that might be in a similar position even if each individual situation must be examined taking all relevant elements into account.

 

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. However, this should not hide other changes that are also of importance for economic operators of different sectors. After a reminder of our VAT alert of April and July, we examine hereafter these different changes.

Input - July 2018

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. On 27 July, the State Council has given his agreement that the Parliamentary should not proceed to a second vote of the law. This makes the law definitive and close the Parliamentary process. The law enters in force on 31 July 2018. Compared to the draft bill, the voted law does not allow anymore the VAT authorities to exclude some members when their participation to the group may lead to a distortion of concurrence. We could consider this change as favorable for the legal certainty of the regime and have no other change to mention.

Input - April 2018

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. Long awaited, this regime aims to avoid VAT on transactions between persons closely bound by financial, economic, and organizational links. While available and interesting for all sectors of activities, this regime is especially attractive for the financial sector, which has been affected by the decisions of the European Court of Justice of 21 September 2017, which refused this sector the benefit of the independent group of persons regime.

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