Global Trustee and Fiduciary Services News and Views Issue 48

39 / 64

Global Trustee and Fiduciary Services News and Views | Issue 48 | 2017 37
Introduction of the personal and joint liability
of managers in the Luxembourg VAT Law
The Law of 23 December 2016 1 (the Tax
Reform) has introduced new provisions 2 in
the Luxembourg VAT Law according to which
managers of companies can be held jointly and
personally liable in the event of a breach of VAT
compliance obligations or VAT non-payment
by the company or companies they manage.
These new provisions have been applicable
since 1 January 2017.
Managers and executive directors of Luxembourg
companies should be aware of such measures as
they can be held liable for the payment of VAT if
the companies they manage have not complied
with their VAT duties (e.g. no/late submission of
the VAT registration application or of VAT returns
and no/late payment of VAT).
Although this specific liability is new for VAT,
its regime is not completely unknown as a
similar liability has existed for decades for
direct taxes. The legislative history of the Tax
Reform made a clear link between the two
types of liability. Hence, it is worth learning
from the existing case law to better understand
the extent of this new VAT liability.
Case law listings from the administrative
courts show that the liability of managers
for direct taxes is not theoretical and the
direct taxes authority do not hesitate to call
managers in guarantee for the payment of
direct taxes. Likewise, the Luxembourg VAT
authority 3 (VAT Authority) announced in its
2016 progress report4 (where the objectives
for 2017 are stated) that it intends to make use
of this new collection tool. Managers should
therefore carefully monitor the tax obligations
of the companies they manage.
The purpose of this section is to outline the
extent of the scope of this liability, as well
as its consequences and how managers can
protect themselves, either in a corrective or
preventive manner.
Scope of the liability
The personal and joint liability for VAT applies
to the following persons (hereafter referred as
Managers or Manager):
• Managing directors ( administrateurs délégués)
• Managers (gérants)
• And any de jure or de facto managers (tout
dirigeant de droit ou de fait) in charge of the
daily management of VAT-taxable persons 5
Having a close look at the list of persons to
which the new liability applies, it appears that
non-executive directors are out of scope.
The provision covers the persons in charge of
running the company, be it on the basis of the
company law, a specific delegation of power
or factual elements. The persons in scope are
mainly persons who are regularly appointed
as Managers, but it could also be entities
or individuals who behave as if they were
Managers in charge of the daily management
of the company (i.e. de facto managers).
RECENT DEVELOPMENTS FOR
DIRECTORS IN THE LUXEMBOURG
INVESTMENT FUND INDUSTRY IN
RELATION TO VALUE ADDED TAX
Recent developments in Value Added Tax (VAT) are worth considering for
directors sitting on the board of investment funds and management companies
in Luxembourg. Firstly, the Luxembourg VAT law introduced a personal and joint
liability of managers since 1 January 2017. Secondly, there’s the VAT treatment
of directors’ fees paid by investment funds and their management companies.
Because of these developments, we expect boards and authorities to put more
focus on VAT liabilities and obligations of entities in the fund sector.