VAT on entertainment in Luxembourg deductible

Representation and entertainment in Luxembourg often excluded

For representation, entertainment and luxury costs, Luxembourg applies a rule whereby part of these falls outside the VAT refund, similar to several other EU countries. Directive 2008/9/EC does regulate the right to refund of foreign VAT, but allows the refund country to exclude certain cost categories — the same exclusions that country also applies to its own entrepreneurs for domestic deduction. Luxembourg makes use of this scope, and the precise definition is set out per cost category in the Requirements list of the Tax Authority for this country.

In practice, this means that not every expense falls into the same category. A business meal with a client is treated differently from an evening of entertainment or a luxury gift, and even within "representation" there may be distinctions between, for example, accommodation costs, meals and gifts. Some of these items are eligible for refund, others are wholly or partly excluded. Which classification applies to a specific receipt depends on how Luxembourg classifies that cost category — and that is precisely what the Requirements list per country provides an answer to, not a general EU rule.

Source: Article 4 Directive 2008/9 and the Requirements list Luxembourg

That refund countries may exclude categories themselves follows from Article 4 of Directive 2008/9/EC, which links refund categories to the national restrictions that a Member State also applies to its own taxpayers. Which