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European Commission - Press release
European Commission calls on Luxembourg to change its rules on VAT
Brussels, 26 January 2011 – The European Commission has officially asked Luxembourg to change its rules on VAT in the case of independent groups of persons. Luxembourg's current rules are incompatible with European Union law.
Under Luxembourg law, the services provided by an independent group to its members are completely free of VAT provided that the members' taxed activities do not exceed 30% of their annual turnover (or 45% under certain conditions). Group members are also allowed to deduct the VAT charged to the group on its purchases of goods and services. Lastly, operations by a member in his or her own name but on behalf of the group are regarded as non-taxable.
The Commission considers that these arrangements infringe the strict rules set out in European Union law.
Under European law, in order to be exempt from VAT the services provided by an independent group to its members must be directly required for their non-taxable or exempt activities. The Luxembourg rule providing for a ceiling for taxed operations does not, therefore, fulfil this condition. The group's exempt activities must be linked exclusively to the exempt activities of group members. Moreover, group members should not be allowed to deduct VAT charged to the group. Finally, the Luxembourg arrangements do not take account of VAT rules in EU law applicable to operations by intermediaries.
The Commission's request takes the form of a reasoned opinion (second step of EU infringement proceedings). If the rules are not brought into compliance within two months, the Commission may refer the matter to the European Court of Justice.
For press releases issued on infringement proceedings in the area of taxation or customs see:
For more information on EU infringement procedures, see MEMO/12/42.
For the most up-to-date general information on the infringement proceedings initiated against Member States, see: