New VAT Regime Announced by Luxembourg Government

Written by: Bridgewest

The Luxembourg government is constantly trying to improve the tax legislation which is a very important aspect for foreign investors coming here. This time, the Ministry for Finance has prepared a new value added tax grouping regulation which was approved at the end of July. Below, our lawyers in Luxembourg explain the content of the new law.

The new VAT grouping rules to replace the Independent Group of Persons rules

Luxembourg has several grouping regimes which provide for the easy recovery of VAT payments from the tax authorities, however, the government just passed Law No. 7278 which provides for the implementation of a new VAT grouping regulations which replace the existing Independent Group of Persons (IGP) regime.

The IGP regulations applied to Luxembourg entities which carried out activities for public interest, however, the new VAT grouping rules provide for additional VAT exemptions for certain activities completed for public interest and comply with the new EU VAT Directive. The new provisions allow for persons to enter cost-sharing groups without being liable for additional costs incurring the payment of the VAT.

Our Luxembourg lawyers can offer more information on how the value added tax applies in the Grand Duchy.

Who will benefit from the new VAT grouping rules in Luxembourg?

The most important beneficiaries of the new VAT rules will be Luxembourg companies in the financial and insurance sectors which can no longer enter the Independent Group of Persons regime.

Under the new regulations, the members of the financial company will be able to set up a cost-sharing group which will enable them to supply themselves with certain services which will be exempt from the value added tax in Luxembourg.

The new law will benefit mostly small financial and insurance providers who cannot purchase assets on their own and will create equality between them and large providers. Also, the members of such a group will be able to have more savings and to lower the costs of each member of the group.

The law entered into force at the end of July. We kindly invite foreign investors interested in opening companies in Luxembourg to contact our law firm for assistance with the company registration process.