Luxembourg's New Group VAT Regime

The Court of Justice of the European Union recently clarified in European Commission v. Germany, Case C-616/15 (September 21, 2017), that the exemption for services provided by an Independent Group of Persons (IGPs) is restricted to specific activities in the public interest enumerated in Article 132 of VAT Directive 2006/112, such as hospitals and schools. Financial services are not included on this list. 

This decision has sparked concern in Luxembourg’s financial sector, which depended on the IGP exemption to enable entities to share resources without incurring VAT costs.   

Now that the IGP exemption is no longer available, Luxembourg plans to follow the lead of most EU Member States and introduce VAT grouping rules in accordance with the option under Article 11 of the EU VAT Directive, with effect from July 31, 2018. 

Under the new grouping rules, two or more persons established in Luxembourg that are closely connected by financial, economic and organizational links can opt to be treated as a single taxpayer for VAT purposes. Groups that exercise this option will be able to make intra-group supplies of goods and services without accounting for any associated VAT. 

Raphaël Glohr and Michel Lambion of Deloitte Tax and Consulting Luxembourg provide detailed guidance on the new grouping regime in their Bloomberg International Daily Tax Report article, New VAT Group Regime—What You Need to Know

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