VAT

TAX_vat

  1. Definition of VAT
  2. Scope of VAT
  3. Definition of a taxable person
  4. Economic activity
  5. VAT registration
  6. Periodicity of the VAT returns 
  7. Invoicing requirements
  8. Analysing a VAT problem in 6 questions
  1. VAT is a tax:
  1. Scope of VAT

The following activities fall within the scope of VAT:

In the absence of a specific exemption, these transactions are liable to VAT

  1. Definition of a taxable person

A taxable person is defined as:

The taxable person must act accordingly, i.e. for professional purposes rather than to meet his/her personal needs or those of staff.

  1. Economic activity

Any activity involving production, trading or the provision of services that is taxable or exempt on account of the revenue it generates.

The following activities (examples) do not constitute an economic activity:

Following the introduction of the VAT package, the concept of the taxable person has been specified and broadened to determine the place of the provision of services in a B2B context.

The following are considered liable for all of the services provided to them:

Example: A mixed financial holding company in Luxembourg that receives accounting services from its Belgian subsidiary in relation to its shareholding activity is liable for tax in Luxembourg as the debtor receiver.

Example: A traditional holding company, a local authority or an association in Luxembourg that is registered for VAT that receives IT services from a French service provider is liable for Luxembourg tax as the debtor receiver.

The identification number becomes a prior condition for checking the status of the taxable person receiving the service and determining the location of the services. The services provided to an overseas receiver registered for VAT are considered to be effected at the place where the service receiver is established, and the receiver becomes liable for VAT.

  1. VAT registration

A taxable person who achieves a domestic turnover in excess of €10,000.

A foreign taxable person who carries out taxable activities in Luxembourg.

A taxable person or legal person who makes intra-Community acquisitions of more than €10,000 per year.

A foreign taxable person who carries out distance selling in excess of €100,000 per year.

A taxable person who only carries out activities without a right to deduct in Luxembourg, and who provides B2B deliveries of goods and/or services in another Member State that are taxable there and not exempt and for which the receiver is liable to pay tax.

Example: property tenant who has opted for VAT for his/her buildings located overseas, but not for those buildings located in Luxembourg.

A taxable person who only carries out exempted activities, who receives deliveries of goods and/or services for which he/she is liable to pay tax from a taxable person established in a Member State.

Example: SIF, SICAV (unit trust company), SICAR (Luxembourg investment fund), management company for an FCP (mutual investment fund), securitisation company.

After submitting an initial VAT return, the taxable person receives two separate VAT numbers from the Administration de l’Enregistrement et des Domaines (Registration and Domains Administration):

- Registration number: configuration: 2006 2428 012

This number is for use during any contact with the AED

- VAT identification number: configuration: LU41032726

This number is for use in the context of intra-Community relations to avoid the application of foreign VAT by the country of the supplier of the goods or services

  1. Periodicity of the VAT returns

Each taxable person must submit periodic returns with regard to the annual turnover achieved over the previous year:

If the turnover is below €112,000, an annual return is required.

If the turnover is between €112,000 and €620,000, quarterly returns and an annual return are required.

If the turnover is higher than €620,000, monthly returns and an annual return are required.

  1. Invoicing requirements
  1. Analysing a VAT problem in 6 questions:

1. Is this a taxable person?
2. Is this a taxable activity?
3. Where did this transaction take place?
4. Is there an exemption?
5. Who is liable for VAT?
6. What is the rate?

1. Is this a taxable person?

A taxable person is considered to be:

In terms of VAT, the economic activity is only acknowledged if a service is carried out for payment (in the broader sense).

If one of these elements is missing, the activity does not fall within the scope of application of VAT.

Examples of transactions and activities that do not fall within the scope of application of VAT:

A taxable person who is exempt is one who only carries out activities and transactions that are exempt from VAT and that do not attract a right to deduct input VAT (e.g.: credit establishments, insurance companies, captive reinsurance undertakings, OPC [collective investment])

A partially taxable person is one who at the same time carries out taxable activities that attract the right to deduct and exempt activities that do not attract the right to deduct input VAT (e.g. universal banks, property companies that have opted for VAT)

2. Is this a taxable activity?

Activities that fall within the field of application of VAT:

These activities are liable to VAT unless specifically exempted.

3. The location

1. Delivery of goods (Art. 14 LTVA)

Principle: Place they were made available

Derogations:

- Place of departure of transport

- Place of installation or assembly

- In the importing Member State

- In the transporting Member State

(Distance selling if the upper limit has been exceeded)

2. Provision of services (Art. 17 LTVA)

Principle: Location where the service provider is established (§1)

Derogations:

- Place where the building is located

- Place where the service is physically carried out (cultural activity, etc.)

- Country of the taxable person who is established in a Member State other than that of the service provider

- Country of a receiver who is established outside of the EU

3. Intra-Community acquisitions of goods (Art. 18ter LTVA)

Principle: Member State in which the transport arrives or from which it departs

4. Importations (Art. 19 LTVA)

Principle: Member State in which the goods are put into free circulation

4. Is there an exemption?

- exportations of goods outside the European Union

- Intra-Community deliveries of goods to taxable persons

- deliveries of goods or services carried out for the purposes of navigation by air, sea and river that are used by companies principally operating international paid transport services for goods or passengers

- deliveries of goods and provision of services in the context of diplomatic and consular relations (including EU institutions)

- transportation of people travelling to or coming from abroad

- financial and banking activities

- insurance and reinsurance activities, including those conducted by insurance brokers and other intermediaries

- property rentals and deliveries (except option)

- medical, hospital, doctor services

- services closely linked to education, childhood or youth, to school or university education and professional/vocational training

5. Who is liable for VAT?

Obligation to pay the VAT due from the taxable person who carries out a Delivery of Goods or a Provision of Services

- VAT due on an intra-Community acquisition of goods by the taxable person who makes the acquisition

- VAT due on intangible services (covered by art 17§2 e LTVA) by the receiving Luxembourg taxable person when the provider is established outside of the country

- VAT due on an importation of goods by the importer

6. What is the rate?

 

TVA