On Thursday 4 May, the Court of Justice of the EU followed the opinion returned in October 2016 by Advocate General Juliane Kokott, who found (case C-274/15) that Luxembourg's rules on independent groups of persons ran counter to EU law.
Under EU law, services provided by taxpayers are normally subject to VAT. Under certain circumstances, however, the VAT directive provides for an exoneration for services provided by independent groups of persons.
In Luxembourg, services provided by such groups are tax-exempt not only when they are directly required by the non-taxable activities of the members, but also when the share of taxed activities of the members (activities subject to VAT) does not exceed 30% (or even 45%) of their annual turnover before tax. Under the same rule, the members of the group are authorised to deduct the VAT invoiced to the group on purchases or services provided not to members, but to the group itself. Lastly, the rules allow operations carried out by a member in his or her own name, but on behalf of the group, to fall outside the scope of VAT for the group.
On these bases, the Court finds that Luxembourg has transposed the rules of the VAT directive (2006/112/EEC) into its own legislation too widely. It also stresses that an independent group of persons is an independent taxpayer providing services to its members, from which it is separate, independently. In light of the group's independence from its members, the members may not, contrary to what Luxembourg permits, deduct from the amount of VAT they are liable to pay from the VAT payable or paid in respect of goods or services provided to the group (and not to those members directly). It also follows, according to the European judges, that Luxembourg has not correctly transposed the VAT directive. (Original version in French by Élodie Lamer)