- Change in VAT Treatment Effective January 1, 2025: Starting January 1, 2025, the VAT treatment for staff secondments will change significantly, with the repeal of the provision exempting certain reimbursements from VAT. All secondments and personnel loans executed or renewed after this date will be subject to VAT, regardless of the payment amount made by the seconding company.
- Relevance of CJEU Judgment: The changes follow the European Court of Justice’s ruling in the San Domenico Vetraria case, which determined that national laws treating reimbursements for staff secondments as non-VAT relevant were not compliant with the VAT Directive. This adjustment aims to avoid potential infringement proceedings from the EU.
- Interpretative Uncertainties and Taxable Base Issues: The new legislation creates uncertainties regarding the determination of the VAT taxable base for secondments, as it does not clarify how to assess the base amount when reimbursements are made. There is ongoing discussion about whether the taxable base will include only amounts exceeding the reimbursement of wages and social security charges or if all reimbursements will now be subject to VAT. Additionally, the legislation preserves taxpayer actions taken before January 1, 2025, under the previous framework.
Source PwC
