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Luxembourg: VAT Rules Amended

(Aug. 17, 2012) On August 7, 2012, Luxembourg issued a decree amending its VAT rules for independent groups of persons. The amended rule, published in the official gazette (Journal Officiel du Grand-Duché de Luxembourg) on August 14, was adopted in response to a reasoned opinion from the European Commission. The opinion, sent to Luxembourg on January 26, 2012, contained a request for an amendment to the country's VAT rules for such groups. (René Offermanns, Luxembourg; European Union: Decree Amending VAT Rules for Independent Groups of Persons Published, IBFD TAX NEWS SERVICE (Aug. 15, 2012), online subscription database.)

The Luxembourg VAT regime had been seen as inconsistent with an EU Directive on the subject (Council Directive 2006/112/EC of 28 November 2006, on the Common System of Value Added Tax, 2006 O.J. (L347/1), available at EURLEX.) This Directive specifies that services provided by an independent group for its members are subject to VAT unless they are linked exclusively to non-taxable or otherwise exempt activities. (Offermanns, supra.)

Luxembourg had established a ceiling for VAT on taxable activities for such groups and thus did not conform to the Directive. The rules were contained in the in the Grand Ducal Decree of January 21, 2004, and Circular No. 7070 of January 29, 2004 (cited in Luxembourg Asked to Modify Its VAT Rules Applicable to Independent Groups of Persons, LOYENS & LOEFF NEWSFLASH (Jan. 30, 2012).)

The new rule, in force from the date of publication, eliminates the VAT exemption for all services related to taxable activities. (Offermanns, supra.)