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By Olivier GASTON-BRAUD, Dechert (Luxembourg) LLP
When analysing the VAT treatment of a payment under a given arrangement or transaction, the focus is generally on the VAT treatment of main remuneration for the service itself. It may be relevant to consider the various other amounts payable under an arrangement, including indemnities and penalties, and whether these other payments are subject to VAT. This is especially important in situation where these penalties may apply to different services with different VAT regime.
The VAT treatment of indemnities is still being considered by the case law of the Court of Justice of the European Union (the “CJEU”), the CJEU following an economic analysis of the contractual relationship...
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