23.12.2024

Luxembourg: VAT and Director fees - opportunities to reclaim undue VAT in Luxembourg

Almost a year after the ruling of the European Court of Justice (“ECJ”) in the case C-288/22 “TP”, a Circular has finally been published by the VAT authorities to clarify the VAT position of Independent Directors.

Relying heavily on the arguments of the ECJ, the Luxembourg District Court’s issued its ruling on the matter on November 22, 2024, and quickly thereafter the courts’ reason has been adopted by the Luxembourg VAT authorities.

As a result, we now have practical guidelines through the Circular 781-2 of December 11, 2024 of the Luxembourg VAT authorities. It addresses some important points on how to recover this undue VAT:

At the level of the Directors, whether individuals or legal persons:

They can apply for a refund through a request on myguichet.lu;
The regularization may go back up to 2018;
The request must be submitted before July 1, 2025;
The filing of amending VAT returns will not be necessary for the Independent Directors ;
Their input VAT deduction right will not be re-assessed for expenses of non-significant amounts (e.g. excluding investment goods);
It will be their responsibility to refund their clients.

At the level of their clients:

Those who received a refund from their supplier will have to regularize their own input VAT deduction;
In the event of a self-assessment of VAT, the taxable person will have to reclaim the undue VAT through its returns;
It will be allowed to proceed to a single regularization of all amounts concerned in the next annual VAT return due.

It must however be noted that the Circular only applies to Directors who deem that they do not act independently from the bodies they govern and therefore do not qualify as a taxable person. Board members are not considered to be independent assuming they do not act under their own responsibility and do not bear any economic risk in relation to their activity.

We advise you to verify your VAT position in Luxembourg, analyzing whether you could be in a VAT refund position when you paid VAT over director fees. Tiberghien can of course assist you with this. Do contact us should you want to discuss this further.

Source: Tiberghien - Lawyers

For further information please visit the following link: Tiberghien - VAT and Director fees : opportunities to reclaim undue VAT in Luxembourg

Author

Gert Vranckx

Counsel (Indirect Tax)

Belgium

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Author

Ngoc-My Nguyen

Senior Associate

Luxembourg

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