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Increase of the normal VAT rate in Luxembourg in 2015 - 11/04/2013


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Future increase of the normal VAT rate in Luxembourg in 2015

On the 2013 State of Nation Speech, the Prime-Minister mentioned that Luxembourg should balance its State Budget by 2016 or, at the very latest 2017. To compensate the loss of revenue from the e-commerce business, the VAT rates should be increased as of 2015, but still remaining the lowest in Europe.

ECJ Case : C–275/11 – GfBk Gesellschaft für Börsenkommunikation VAT exemption for investment advisory services for funds confirmed

On 7 March 2013 CJEU published its decision in the case C – 275/11 GfBk Gesellschaft für Börsenkommunikation mbH.

Dispute

In this case, GfBk Gesellschaft für Börsenkommunikation mbH (“GfBk”) was providing investment advisory services to a management company that was managing a retail investment fund. GfBk advised the management company “in the management of the fund” and “constantly to monitor the fund and to make recommendations for the purchase or sale of assets”. Within its role, GfBk undertook to “pay heed to the principle of risk diversification, to statutory investment restrictions … and to investment conditions …”.

The CJEU was in this respect asked whether such investment advisory services can be VAT exempt as “management of special investment funds” (Article 44 (1) (d) LTVA).

Decision

As we already informed you, the CJEU ruled that such investment advisory services should be exempt from VAT as they fall under the definition of “management of special investment funds”.

In its reasoning, the CJEU summarized that in order to be VAT exempt as “management of special investment funds”, the “management services provided by a third-party manager must, viewed broadly, form a distinct whole and be specific to, and essential for, the management of special investment funds”. In that regard it was noted that an investment fund is, for a fee, assembling and managing portfolios of transferable securities using the capital provided by subscribers. Thus, in order to determine whether investment advisory services provided by a third party to a management company can be exempt from VAT, it has to be analysed whether such investment advisory services are intrinsically connected to the activity characteristic for an investment fund (being collective investment in transferable securities).

Considering the above mentioned, services consisting in giving recommendations to purchase and sell assets are intrinsically connected to the activity characteristic of a management company which consists in the collective investment in transferable securities of capital raised from the public.

The fact that such investment advisory services do not alter the fund’s legal and financial position (which is a general condition for financial services to be exempt from VAT) is not contradictory to the qualifying such services as “management of special investment funds”.

Impact in Luxembourg

This decision confirmed the current practice in Luxembourg and thus is not as surprising as for other EU Member States that considered such services differently.

 

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