Luxembourg: VAT treatment of directors’ fees

Luxembourg: VAT treatment of directors’ fees

The value added tax (VAT) treatment of fees paid to company directors has been unsettled, but recent statements from tax authorities appear to indicate some resolution of the issue may be forthcoming.

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In early February 2016, the head of the Luxembourg VAT authority affirmed what was described as existing policy—that is, Luxembourg VAT applies with respect to fees paid to directors for services / supplies, and are not exempt from VAT. However, flexibility from the VAT authorities with regards to previous years, up to 2015, was advocated by the VAT authority.

The Minister for Finance—considering the issues triggered by inconsistencies in the treatment of directors’ fees (specifically, between indirect and direct taxes)—also affirmed this position and stated that necessary clarifications and adjustments were needed as part of the upcoming tax reform. Accordingly, this VAT treatment would not become effective before 1 January 2017.

 

Read a March 2016 report prepared by the KPMG member firm in Luxembourg: Luxembourg VAT on directors’ fees

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