Director’s fees not subject to VAT: the Luxembourg district court implements the CJUE’s ruling

Last Friday, on 22 November 2024, the Luxembourg district court (Tribunal d’arrondissement – the “District Court”) has ruled on the Luxembourg VAT treatment of the remuneration (tantième) received by a director of a Luxembourg company, thereby implementing the preliminary ruling of the Court of Justice of the European Union (“CJEU”) of 21 December 2023. As a reminder, in the landmark preliminary ruling won by Elvinger Hoss Prussen, the CJUE ruled that such remuneration was not subject to VAT considering that the activity as a member of a board of directors of a société anonyme under Luxembourg law is not exercised independently for VAT purposes. For more background on the case, please refer to our previous newsletters dated 22 December 2023 and 13 July 2023.

Implementing the CJUE’s ruling, the District Court has therefore decided to annul the tax notice and to request the refund of the VAT that was unduly collected by the Luxembourg VAT authorities (Administration de l’enregistrement, des domaines et de la TVA).

Following the CJUE’s ruling, the Luxembourg VAT authorities had announced that a new circular would be issued as soon as the District Court had delivered its decision, and had waived the statute of limitation for the year 2018. Practical guidelines had been released in the meantime pending the decision of the District Court with respect to the implementation of the practical consequences of this decision, which provided the following: 

• An ad-hoc procedure (specific to the regularisation of director’s fees) will be published and made available on myGuichet;
• As already specified in Circular No 781-1 issued on 22 December 2023, the tax authorities are looking for the implementation of non-bureaucratic regularisation process of the VAT unduly paid;
• From a practical point of view, if invoices were issued by the director, corrective invoices may have to be reissued without VAT;
• Although, in principle, regularisation can only be made for the period that is not closed on the basis of the statute of limitation, meaning that the year 2018 would be closed, the Luxembourg State waived the statute of limitation for the year 2018.

It is expected that the final guidelines on the recovery procedure and practical implementation including the set-up of the platform will be issued by the Luxembourg tax administration shortly.