New rules concerning the deductibility of VAT

The Luxemburgish VAT administration modified the rules of VAT deduction in case of so called ‘mixed’ activity. 

The new Circular No 765-1 of June 2018 clarifies that the right to deduct the VAT on goods and services delivered to a taxable person is not applicable on purchases connected with activity beyond the scope of economic activity within the meaning of the VAT law. The previous Circular No 765 imposed the partial deduction of VAT in case of economic activity giving the right to deduct the VAT and not giving this right. The previous rules concerning the limitation of VAT deductibility have been extended to the non-economic activity within the meaning of the TVA law. 

The new law is applicable from the fiscal year 2018