Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014 - (Page 6)

Lux News Luxembourg Tax News LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°84 - JAN / FEV / MAR 2014 VAT and risk management services for funds: new circular issued 6 In November 2013, the Luxembourg VAT Authorities Administration d'Enregistrement et des Domaines (AED) issued the Circular No. 723ter (the Circular) confirming that risk management services for funds could be VAT exempt. The exemption based on Article 44.1.d) of the Luxembourg VAT Law, as amended, is available for UCITS as well as Alternative Investment Funds (AIF). For further information, see the Tax Alert entitled Revised list of investment funds capable to receive VAT exempt management services. The Alert can be downloaded from the tax section of the EY Luxembourg website The Circular confirms that the risk management services should be considered as management services exempt from VAT pursuant Article 44.1.d) of the Luxembourg VAT Law. When the manager subcontracts a part of these services to a third party, the VAT exemption applies under certain conditions; the Circular refers to the Circular No. 723bis of 30 April 2010 which confirms that sub-contracted services are VAT exempt to the extent that these service * Are not be considered as "isolated" services * Meet certain criteria defined by the Court of Justice of the European Union: - Viewed broadly forming "a distinct whole" and "specific and essential to the activity of the fund" Abbey National case - C-169/04 of 4 May 2006 - "Intrinsically connected to the activity of the fund" GfBk case - C-275/11 of 7March 2013 This Circular is a positive step for the Luxembourg investment fund industry by ensuring a favorable VAT treatment to services as fundamental as risk management services. Investment funds have, in principle, no right to recover the VAT incurred on their costs. However, it is important not to rely on this Circular to apply the VAT exemption to any type of service rendered to a fund or delegated to a third party by the manager of a fund or by other services provider. A careful, "case by case" approach remains advisable. It is also important to keep in mind that the exemption implies that services providers cannot recover the VAT incurred on their own costs. Michel Lambion, Indirect Tax Leader Olivier Lambert, Senior Manager VAT on non-compliant purchase invoices In May 2013, the Court of Justice of the European Union (CJEU) has ruled in case C-271/12 (Petroma Transports S.A.) that national tax authorities are entitled to refuse input VAT deduction where the purchase invoice lacks required information, even when the missing information is obtained after the VAT audit. Businesses receiving VAT invoices should therefore check that they have adequate controls in place to ensure that purchase invoices - including inter-company invoices - are fully compliant, and that any non-compliant invoices are challenged promptly. This will be particularly important for businesses that operate Shared Service Centers or that rely on a Business Process Outsource (BPO) service provider to handle and post Accounts Payable invoices. Businesses that issue VAT invoices should ensure that they are complete and fully compliant with EU Directives, in order to minimize the risk of customers seeking to recover from them VAT that has later proved to be irrecoverable. Suppliers should also ensure that they have procedures in place promptly to correct any non-compliant invoices that may be challenged by customers. Michel Lambion, Indirect Tax Leader Yannick Zeippen, Indirect Tax Partner VAT on cars put at the disposal of employees residing in Germany by a foreign employer In September 2013, the Luxembourg AED announced to refer to the VAT committee of the Council of the European Union, in order to clarify whether the new German interpretation of the German VAT Law, as amended, on the tax treatment of the private use of a car which is made available by a foreign resident employer to its employees residing in Germany is compatible with the Luxembourg applicable VAT provisions. At this time, Luxembourg considers this as a kind of fringe benefit subject to Luxembourg VAT. The German position follows a change in the rules applicable to the localization of cross-border lease of means of transport (including cars) to nontaxable persons (such as individuals). In September 2013, the German Ministry

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INTERVIEW Martin Sadleder- Treamo Business Consulting

Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014