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Luxembourg: VAT exemption for group members, CJEU Advocate General’s opinion

Luxembourg: VAT exemption for group members

The Advocate General of the Court of Justice of the European Union (CJEU) released an opinion in the EC’s case brought against Luxembourg (C-274/15) concerning an exemption from value added tax (VAT) for services provided by an “independent group of persons” to its members.


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Under Luxembourg VAT law, a measure provides an exemption from VAT relating to services provided by an “independent group of persons” to its members. The VAT Directive 2006/112/EC, as transposed into Luxembourg law, provides that services provided by an independent group of persons to its members can benefit from a VAT exemption, as long as certain specific conditions are satisfied. In the proceedings before the CJEU, the EC is seeking a declaration that the VAT regime in Luxembourg is contrary to the VAT Directive.

Advocate General’s opinion

The CJEU Advocate General found:


  • The exemption under the VAT Directive must be interpreted strictly by Luxembourg, and currently it is not. 
  • An exemption may be allowed only in specific situations such as when the independent group of persons is directly supplying services that are necessary to the exercise of the VAT-exempt activity of its members, or for which the members of the group would not be considered as taxable persons for VAT purposes.
  • Under Luxembourg law, the VAT exemption could be extended to situations for which the support services supplied are directly linked to the taxable activities of the members, which was found to be a clear violation of the VAT Directive.
  • Services supplied to the members must be directly linked to their VAT-exempt activity or be “out of scope.” In instances when a member of an independent group of persons also carries out a taxable activity for VAT purposes, the application of the VAT exemption on the services provided by the group would not be possible, unless these services were related to the exempt activity only or were out of scope.

The Advocate General concluded that independent groups of persons are not to be considered as taxable persons for VAT purposes, insofar as a group is rendering VAT-exempt services to its members. 

KPMG observation

If the CJEU were to follow the opinion of Advocate General in its judgment, there could be far-reaching consequences concerning current use of the VAT exemption. It appears such a judgment also could affect some of the reasons for using independent groups of persons, and would limit their use to very specific situations—for example, only a small fraction of economic operators like the medical sector would be able to use this structure, provided that they operate an activity that would be completely exempt from VAT. 

While the Advocate General’s opinion is not binding on the CJEU, it does represent a proposal for a legal solution. It is up to the judges who will now begin their deliberations in this case, with judgment to be given at a later date. Still, given the opinion of the Advocate General, tax professionals have observed that now is an appropriate opportunity to review existing independent groups of person structures and to anticipate the consequences resulting from a judgment that could follow the opinion of the Advocate General.


Read an October 2016 report prepared by the KPMG member firm in Luxembourg: Opinion of Advocate General Kokott in the case Commission v. Luxembourg released on 6 October 2016

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