VAT status update for directors in Luxembourg: Retroactive VAT regularization

At a Glance

Since the decision was made in December 2023 that directors are not taxable for VAT, Luxembourg’s VAT authority has announced that “non-bureaucratic” procedures for retroactive VAT regularization will be made available on “My-Guichet.” They have also confirmed that, considering the timing of the ruling, the ability to retroactively regularize VAT should extend back to 2018, instead of 2019. However, as we await the civil tribunal’s final decision, many questions with significant implications remain unanswered.

A closer look

VAT updates for directors in Luxembourg

On 21 December 2023 1, the Court of Justice of the European Union (CJEU) ruled in its “TP” case (C-288/22) that a natural person acting as a director of a “société anonyme” (public limited company) in Luxembourg does not qualify as a taxable person for VAT because “he or she does not act on their own behalf or under their own responsibility and does not bear the economic risk linked to their activity.”

The following day, Luxembourg’s VAT authorities informed that they will implement a “non-bureaucratic” procedure to enable retroactive regularization of the VAT paid on director’s remunerations.

On 22 December, the VAT authorities also issued circular 781-1; this immediately suspended circular 781 (published 30 September 2016) which had clarified that directors of companies were VAT taxable persons and therefore their remunerations were, in principle, subject to VAT. This new circular will remain in place until the Luxembourg civil tribunal issues2 its final decision; until then, it’s important to remember that we are in a transitory period.

VAT authorities announce regularization procedure will be available via “My-Guichet ”.

On 15 January 2024, the Luxembourg VAT authorities made further clarifications. First, they reiterated that the standard procedure would require directors to issue credit notes, reimburse the VAT to the companies, and then request reimbursement of the equivalent amount from the VAT authorities.

Second, they stated that the “non-bureaucratic” procedure they referenced on 22 December 2023 will be available in “My-Guichet,” but without providing more details. We can, however, expect and hope that this procedure would lower the administrative tasks of directors and absolve them from having to prefinance any VAT. The use of the “My-Guichet” procedure is not mandatory. Thus, it is still possible to use the standard procedure.

Considering the impossibility of performing regularizations in the very last days of 2023 following the 21 December ruling, the VAT authorities also confirmed that the period of time to regularize the VAT paid on directors’ remunerations should be extended to 2018 instead of 2019. This is welcome news for concerned persons who would otherwise lose one whole year of regularization.

Open questions

These announcements are certainly favourable and welcomed. However, some important questions remain unanswered, including:

• When will the tribunal release its judgement?
• Will the interpretation and wording of the tribunal be restrictive and stick only to natural persons acting as directors of “société anonyme” (“public limited companies”)? Or will it be broad enough to include members of managing bodies in other types of companies, such as managers of “société à responsabilité limitée” (“limited liability company”)?
• What about companies who act as director or manager of other companies, or if they provide persons acting as such?Once the tribunal makes their decision, how soon will the “My-Guichet” procedure be available for use?
• How exactly will this procedure work? 
• What information will directors need to provide?
• What about the VAT that directors deducted from their costs in the past?
• What happens if a director is deregistered for VAT, has left the country or has died?What happens if the company is deregistered for VAT or has been liquidated ?

Based on the most recent announcements, the VAT authorities have adopted a pragmatic approach to enable smooth implementation of this case’s ruling. While many questions remain unanswered, concerned persons and companies should start anticipating possible outcomes in order to better prepare for their impact on their respective position.

The Deloitte Luxembourg Indirect Tax team remains at your disposal to discuss the potential impacts on your organization.

¹ For more details, we refer to our newsletter of 21 December 2023 “VAT: A natural person acting as a director is not a taxable person for VAT”.

² The Luxembourg civil tribunal that lodged the case with the CJUE (which provided its own interpretation of the VAT directive) must still issue its own decision in the specific case of Mr. TP.

³ Businesses - Guichet.lu - Luxembourg (public.lu)

⁴ The statute of limitations states that VAT can be regularized within five years after the last day of the year in which the VAT was due or deductible (31 December).