VAT

New tax measures revealed in the coalition agreement published by the future government – ATAD Bill amendments
07/12/2018

Further to the elections for Parliament held in October this year, the former ruling coalition between the liberal, ecological and socialist parties emerged victorious and the Prime Minister was appointed by the Grand Duke to form a new government.

Brexit relocations: The view from CMS Luxembourg
26/11/2018

Luxembourg’s well-established reputation as a leading financial centre makes it a natural candidate for financial companies weighing their Brexit relocation options.

CJEU: Open door for VAT recovery on transaction costs in case of share disposal
15/11/2018

On 8 November 2018, the Court of Justice of the European Union (“CJEU”) released its decision in the C&D Foods Acquisition ApS case (C-502/17) concerning the deduction of input VAT on consultancy costs incurred by a holding company in connection with a sale of a sub-subsidiary’s shares.

CJEU: VAT on share disposal costs recoverable in certain cases
12/11/2018

VAT on costs incurred in connection with an envisaged share disposal is in principle not recoverable. However, if the reason for the disposal lies in the VAT taxed activities of the parent company, VAT on the disposal costs may be recoverable. 

The German Federal Tax Court limits German CFC rules and anti-abuse provisions to wholly artificial arrangements
24/10/2018

In a decision of the German Federal Tax Court (GFTC) from 13 June 2018 (Decision I R 94/15 published on 17 October 2018), the GFTC ruled, among other things, that the German rules on controlled foreign companies (CFC) are not applicable if a foreign CFC is performing a genuine economic activity.

ECJ: VAT on abort costs fully deductible
18/10/2018

VAT on abort costs in case of an unsuccessful takeover bid is deductible, provided the buyer intended to supply management services for consideration to the target company.

VAT deduction right of holding companies - New Guidelines published by the VAT authorities
13/08/2018

• On 11 June 2018, the Luxembourg VAT Authorities published Circular n° 765-1 providing additional guidelines on the VAT deduction right of partial VAT taxable persons, i.e. taxable persons performing both activities within the scope of VAT and activities outside the scope of VAT.
• A first Circular n°765 was published in 2013, focusing specifically on the VAT deduction right of mixed VAT taxable persons and stating that mixed taxable persons should determine whether input VAT can be deducted based on a direct allocation of their costs to specific revenues or based on specific keys.
• While Circular n°765 provides guidelines regarding the VAT deduction methodology applicable to companies performing both VAT taxable and VAT exempt activities, Circular n°765-1 clarifies the methodology to be used by companies carrying out both economic activities (VAT taxable or VAT exempt) and non-economic activities (outside the VAT scope – e.g. passive holding of shares), so called ‘‘partial VAT taxable persons’’.
• As from 1 January 2018, the new Circular extends the VAT deduction methodology described as per Circular n°765 to partial VAT taxable persons. The latter have to therefore determine their VAT deduction right by applying the direct allocation method or specific allocation keys.

Tax Treatment of virtual currencies
08/08/2018

Following decisions of the Court of Justice of the European Union¹ and of the French Conseil d’Etat² dealing with virtual currencies (e.g., bitcoin, ethereum), the director of the Luxembourg direct tax administration clarified the tax treatment applicable to virtual currencies in a circular issued on 26 July 2018 (the Circular).

VAT group legislation voted
30/07/2018

The bill of law n°7278 implementing the VAT group into Luxembourg law, as outlined in our previous Newsflash on 13 April 2018, was voted on 26 July 2018 by the Chamber of Deputies.

Unrestricted VAT deduction for active holding companies
11/07/2018

On 5 July 2018, the Court of Justice of the European Union (“CJEU”) released a welcome decision in the Marle Participations case (C-320/17) concerning the deduction of input VAT by a holding company on costs incurred in relation to acquisitions and sales of shares in subsidiaries.