Source chd.lu
Summary
Bill No. 8339 amends the law concerning value-added tax (VAT) by extending the self-assessment mechanism to include mobile phones, tablets, laptops, gaming consoles, integrated circuits, and deliveries of raw or semi-finished metals. The purpose is to prevent VAT fraud, particularly “carousel frauds.” The Council of State supports the bill, and the Finance Committee has examined it. The bill expands the scope of Article 61 of the VAT law and is based on Directive 2006/112/EC. The Council of State understands the need for this expansion due to recent cases of fraud involving electronic devices. The bill aims to address vulnerabilities in the current legislation and reduce financial risks.
Unofficial translation
Bill No. 8339 CHAMBER OF DEPUTIES Bill amending the amended law of February 12, 1979, concerning value-added tax (VAT)
REPORT OF THE FINANCE COMMITTEE (December 15, 2023) The Committee consists of: Ms. Diane ADEHM, President, Laurent MOSAR, Rapporteur; Mr. Guy ARENDT, Maurice BAUER, André BAULER, Ms. Taina BOFFERDING, Corinne CAHEN, Mr. Sven CLEMENT, Franz FAYOT, Patrick GOLDSCHMIDT, Fred KEUP, Ms. Paulette LENERT, Mr. Marc SPAUTZ, Ms. Sam TANSON, and Mr. Michel WOLTER, Members
- Background Bill No. 8339 was submitted by the Minister of Finance on November 3, 2023. The bill was presented to the members of the Finance Committee on November 30, 2023, and Mr. Laurent Mosar was appointed rapporteur during the same meeting. The Council of State issued its opinion on December 12, 2023. The Finance Committee examined it on December 15, 2023. The adoption of the report took place during the same meeting.
- Purpose of the Bill The purpose of the bill is to amend Article 61 of the amended law of February 12, 1979, concerning value-added tax (VAT) to modify the provisions related to the self-assessment of VAT. The scope of operations subject to the self-assessment mechanism is extended to include the supply of mobile phones, tablet computers, laptops, gaming consoles, integrated circuits, as well as deliveries of raw or semi-finished metals. Article 61 of the VAT law defines the person liable to the Treasury for VAT due to the delivery of goods or the provision of services. In principle, this person is the taxable person who makes the delivery of these goods or the provision of these services. Due to VAT fraud, especially “carousel frauds,” Article 199bis of Council Directive 2006/112/EC of November 28, 2006, on the common system of value-added tax, allows Member States to implement a self-assessment mechanism. Member States can designate the acquirer as the person liable for VAT for predefined deliveries of goods and services that pose a risk of fraud. Certain provisions based on Article 199bis of Directive 2006/112/EC have been transposed into Paragraph 3 of Article 61 of the VAT law. Luxembourg has implemented a self-assessment mechanism for the transfer of greenhouse gas emission certificates, electricity, or gas between two taxable persons established within the country. The application of provisions based on Article 199bis of Directive 2006/112/EC is time-limited, and the application period has been extended until December 31, 2026. The extension is based on the belief that the risk remains and is often linked to organized crime or even terrorism financing. It is highly likely that Directive 2006/112/EC will be revised again regarding VAT rules. However, until a new text is adopted, vulnerabilities will persist. To avoid exposing itself to such a major financial risk, the bill seeks to enhance national legislation by expanding the scope of operations subject to the self-assessment mechanism. Specifically, the bill proposes to extend the self-assessment mechanism to deliveries of mobile phones, integrated circuits, laptops, gaming consoles, and headphones. It also includes deliveries of raw or semi-finished metals, which pose a particular risk due to the generally large volume and significant value of the associated deliveries.
- Council of State’s Opinion The Council of State has no observations on the bill. It understands that expanding the current VAT self-assessment mechanism is related to recent cases of carousel fraud involving deliveries of mobile phones and other electronic devices revealed by the European Public Prosecutor’s Office. The Council of State also points out that Article 199 of the Directive allows Member States to introduce a similar mechanism for deliveries and services related to the construction sector, and this option has been exercised in several neighboring states.
- Commentary on the Articles Article 1 Article 1 expands the scope of Article 61, Paragraph 3, of the amended law of February 12, 1979, concerning value-added tax (VAT), which currently provides in letters a) and b) that the tax on domestic transfers of certificates of gas, electricity, and greenhouse gas emissions is due by the taxable person acquiring these certificates. The expansion includes the following elements:
- Deliveries of mobile phones, including devices designed or adapted to be used in connection with a licensed mobile phone network, whether or not they have another use (proposed Article 61, Paragraph 3, first paragraph, letter c);
- Deliveries of integrated circuits as electronic components not yet mounted in products intended for final consumption (proposed Article 61, Paragraph 3, first paragraph, letter d);
- Deliveries of laptops, tablet computers, gaming consoles, and headphones (proposed Article 61, Paragraph 3, first paragraph, letter e);
- Deliveries of raw or semi-finished metals (proposed Article 61, Paragraph 3, first paragraph, letter f), as defined in the proposed Annex F by their Combined Nomenclature (CN) code. Goods referred to in letters c) to f) of proposed Article 61, Paragraph 3, first paragraph, are goods intended to be delivered to both a taxable person and a non-taxable person. To limit the possibility that a non-taxable person provides a taxable person’s identification number to a seller to obtain a self-assessment mechanism for VAT-exempt goods, it is proposed to introduce a limit of EUR 10,000 corresponding to the remuneration charged for the delivery of such goods. The Council of State notes that proposed Article 61, Paragraph 3, second paragraph, introduces a EUR 10,000 threshold below which the self-assessment mechanism does not apply. Below this threshold, it is the supplier of the goods or service provider who remains liable for VAT payment. The Council of State acknowledges the goal of distinguishing between situations where the purchase is for “final consumption” or “commercial” purchase, i.e., the purchase of goods for resale or the purchase of a service that will be subsequently re-invoiced. However, the Council of State wonders whether it would be appropriate to set this threshold lower. The Finance Committee is informed that regardless of the threshold set, if there is an intent to defraud, the threshold will have no deterrent effect. Moreover, with a lower threshold, the goal of excluding final consumption transactions will no longer be guaranteed. Also, a bona fide commercial, if the counterpart suggests dividing the delivery of goods or invoicing the delivery so that the invoiced amounts are below EUR 10,000, will suspect fraudulent intent and refrain. If the buyer is an accomplice to such fraud, it will be difficult for him to justify to the tax authorities the commercial reasons for such splitting, and the tax authorities can refuse the refund of upstream VAT and involve the Public Prosecutor
From a legislative perspective, the Council of State notes that it is excessive to replace an entire paragraph if the intention is to modify only a single word or phrase. It is only when multiple passages of text within a paragraph need replacement or addition that it is appropriate to replace the entire paragraph. In following this approach, each modification should be labeled with a number “1st,” “2nd,” “3rd,” etc., so that the article under review is reformulated as follows:
“Art. 1. Article 61, paragraph 3, of the amended law of February 12, 1979, concerning value-added tax, is modified as follows: 1st. In the introductory sentence, the words ‘des livraisons de biens et’ are inserted between the words ‘l’assujetti destinataire’ and the words ‘des prestations de services suivantes’; 2nd. In subsection b), the words ‘la fourniture’ are replaced by the words ‘les livraisons’; 3rd. Following subsection b), new subsections c) to f) are inserted as follows: ‘…’; 4th. Paragraph 3 is supplemented by a new paragraph 2 as follows: ‘….'”
The Finance Committee decides to adopt the legislative structure proposed by the Council of State.
- Article 2 Article 70ter of the VAT law was introduced into said law by Article 1 of the law of July 26, 2023, amending the amended law of February 12, 1979, concerning value-added tax for the transposition of Council Directive (EU) 2020/284 of February 18, 2020, amending Directive 2006/112/EC with regard to the establishment of certain requirements applicable to payment service providers, which comes into effect on January 1, 2024. Article 2 of this bill aims to correct a material error that had slipped into the text submitted to the Chamber of Deputies.
This article does not prompt any observations from the Council of State.
- Article 3 It is planned to supplement the VAT law with an Annex F representing the list of raw or semi-finished metals referred to in Article 63, paragraph 3, paragraph 1, letter f), with their NC code in the combined nomenclature and their designation.
[Table – see link]
This article does not prompt any observations from the Council of State.
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- Proposed text by the parliamentary committee Considering the above, the Finance Committee recommends to the Chamber of Deputies to adopt bill No. 8339 in the following terms: … (Complete translation of the proposed modifications and additions in Article 1, 2, and 3 as provided in the text)…
- Article 4 This law comes into effect on January 1, 2024.
- Luxembourg, December 15, 2024 The President, The Rapporteur, Mrs. Diane Adehm Mr. Laurent Mosar
