- The Luxembourg District Court (LDC) ruled that director’s fees fall outside the scope of value-added tax (VAT) as long as certain criteria are met.
- The LDC’s decision does not deviate from the judgment of the Court of Justice of the European Union (CJEU).
- The Luxembourg VAT authorities (LVA) issued several circulars to provide guidance on the scope, refund procedure, and reporting obligations.
- Luxembourg-based directors should not qualify as taxable persons from a VAT perspective even though they carry out an economic activity, as long as they do not assume any personal obligations concerning their clients’ debts.
- The LDC’s decision applies to individuals/companies rendering directorship services to public limited companies.
- Luxembourg directors are not obliged to launch the regularization process.
- The statute of limitations for 2018 and 2019 has been extended until 1 July 2025.
- Luxembourg directors can opt for the standard procedure or the simplified procedure to recover the VAT collected and paid to the LVA.
- Luxembourg companies that self-assessed VAT under the reverse charge mechanism on director’s fees paid to directors established abroad must regularize this when filing their closest annual VAT return.
- The LVA requested that Luxembourg VAT on director’s fees be paid as of 1 January 2017.
- Luxembourg directors were obliged to apply Luxembourg VAT on their fees unless they were eligible to apply the small undertakings scheme or the assisting investment vehicles listed in Article 44, 1., d) of the Luxembourg VAT Law.
- Luxembourg companies paying director’s fees to foreign directors/managers had to self-assess Luxembourg VAT under the reverse charge mechanism.
- The CJEU issued its judgment C-288/22 to determine the VAT treatment applicable to director’s fees.
Source: insightplus.bakermckenzie.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
