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VAT Changes Forecast for 2011

Luxembourg

Following on from the so-called "VAT package", a recent draft law forecasts changes to some of the European Directives in the Luxembourg VAT law. The new rules will be effective as from 1 January 2011. Taxand Luxembourg summarises the changes planned for 2011 and conditions that will need to be met.

Changes in the place of supply of certain services
Until 31 December 2010, cultural, artistic, sporting, scientific, educational, entertainment services or similar services, including services of the organisers of such activities, are deemed to take place where they are physically carried out, notwithstanding the VAT status of the recipient of these services.

From 1 January 2011, these services, with the exception of "admission services and ancillary services", supplied to taxable persons, will be deemed to take place where the recipient is established. They will therefore, as a result, be subject to VAT under the reverse charge mechanism. No change is foreseen for these services rendered to non-taxable persons.

"Admission services" are considered as services where the distinguishing characterstic is to give access to a manifestation in exchange for a ticket or the payment of a fee. "Ancillary services to admission services" can notably be the use of the bathroom, cloakroom, etc. during the manifestation.

Exemption of import of goods - new conditions
The European VAT Directives forecasts a VAT exemption on the imports of goods followed by intracommunity supplies / transfers of goods to a taxable person established in another Member State. This exemption is currently applied differently by the various Member States. Certain taxable persons have taken advantage from these discrepancies between Member States, leading to VAT fraud.

In order to fight against such fraud, the following three conditions will have to be met as from 1 January 2011 in order to benefit from the VAT exemption applicable to imports of goods followed by intra-community supplies / transfers of goods:

  • Obligation for the importer to be registered for VAT purposes in the Member State of import (or to appoint a fiscal representative registered for VAT in this Member State). This VAT number has to be provided at the time of import to the competent Authorities.
  • Obligation for the importer to provide, at the time of import, the VAT number of the taxable person receiving the goods in the other Member State.
  • Obligation for the person claiming the VAT exemption on imports to provide proof that the goods are intended to be transported from the Member State of import to another Member State. This proof may have to be provided upon request from the competent Authorities.

Success in the fight against VAT fraud will of course be closely linked to the exchanges of information between the Customs and the VAT Authorities of the Member States concerned.

Other amendments
Several other amendments will be put into place as from 1 January 2011. These amendments do not however challenge the general VAT principles. They relate to:

  • The VAT regime applicable to supplies and imports of natural gas and electricity.
  • The VAT treatment of transactions with European Community institutions and other international bodies recognised by the public Authorities.
  • The VAT deduction rules applicable to immovable properties used for private and business purposes.

Your Taxand contact for further queries is:
Christophe Plainchamp
T. 352 (26) 940 280
E. Christophe.Plainchamp@atoz.lu

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