EU VAT guide – Luxembourg
VAT rates in Luxembourg
How much is VAT in Luxembourg?
The Standard VAT Rate (Taxe sur la valeur ajoutée (TVA)) in Luxembourg is 17%.
Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and educational services.
Luxembourg VAT Rate | Rate Type | Coverage and imposition |
17% | Standard Rate | This applies to all taxable supplies in the country besides those that can benefit from reduced rates or being VAT-exempted |
14% | Intermediate Rate | Printed advertising material; Solid mineral fuels; Supply of wine under certain conditions |
8% | Reduced Rate | Intra-community acquisition of works of art; Intra-community supply of works of art; Repair of bicycles; Electrical energy |
3% | Super Reduced Rate | Food products; Books, newspapers, and periodicals; Water distribution; Passenger Transport |
The exact list of taxable transactions and allocated Luxembourg VAT rate can be found in VAT Luxembourg regulations.
VAT thresholds in Luxembourg
The VAT legislation contains valuable information about the VAT threshold in Luxembourg and its applicable provisions. Interpreting the appropriate information shared by Tax Authority officials is also a helpful source of information.
VAT registration threshold for resident businesses: Residents can benefit from a threshold of EUR 35,000 for the supply of goods and/or provision of services where the place of supply is within the country. The turnover calculation period is based on the consideration received in the calendar year.
VAT registration threshold for non-resident businesses: In most cases, there is no registration threshold for foreign businesses without a permanent establishment in the country. However, there are cases where a non-established taxable person could adhere to the threshold of EUR 35,000.
VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.
VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.
VAT Taxable Activities in Luxembourg
A taxable person by Luxembourg VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results.
Types of taxable activities that trigger the imposition of Luxembourg VAT:
- The supply of goods and rendering of services in Luxembourg for consideration;
- Receipt of reverse-charge services by a taxable person in Luxembourg;
- Export of goods;
- Import of goods;
- Intra-community acquisition of goods.
Other case scenarios exist where domestic or foreign businesses should impose Luxembourg VAT on their transactions.
Tax Representative in Luxembourg
For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Luxembourg can fulfill their tax obligations without contracting a tax representative.
Having a tax intermediary isn’t compulsory for EU-established companies. Still, the economic operator could acquire the professionals to ease and streamline compliance challenges for its operations in the country.
VAT on Electronically Supplied Services in Luxembourg
Electronically Supplied Services
The EU VAT Directive defines Electronically Supplied Services (ESS) as those whose delivery depends on the Internet or similar digital systems. A relevant feature of ESS is its automated nature, which mainly excludes any necessity for human involvement. Services delivered through non-digital means do not fall under this category.
Luxembourg has incorporated the ESS principles into its national legislation, ensuring alignment with the EU VAT Directive and related regulations. Adding these provisions from the EU VAT framework simplifies the compliance challenges for digital services providers, tax authorities, and customers.
This transparency benefits the taxable entities governed by these provisions and the tax authorities.
The harmonization of the local tax rules with the ESS ones, as defined in the EU VAT Directive, permits businesses and tax authorities to face fewer challenges in adequately using tax rules surrounding the rather complicated sector of digital commerce.
Nonetheless, even with these clarifications, the interchangeable use of terms like “digital services,” “digital products,” and “electronic services” can still confuse their definitions and the associated tax implications.
Taxability Rules for ESS
Adopting the E-Commerce VAT package on July 1, 2021, brought significant changes to the EU VAT framework. These changes range from introducing a new reporting scheme to establishing new taxability rules.
The main objective of the EU regulators was to reduce the bureaucratic burden for EU and non-EU cross-border operating businesses, specifically focusing on taxable persons operating in distance sales of goods and provision of digital services.
New rules paved the way for the possibility of using simplified reporting tools, decreased the number of cases that mandate VAT registrations in more than one country, and reduced the budget these businesses need to allocate yearly for VAT challenges for operations within the Single Market.
Important rules introduced by the E-commerce VAT reform from 2021 (non-exhaustive list):
B2B Electronically Supplied Services: For B2B transactions, the EU-wide harmonized place of supply rule should be applied.
B2C Electronically Supplied Services: Taxable persons without a place of business in any of the MS should follow the place of supply rule based on the customer’s location. This clarifies tax obligations for vendors providing services to end customers residing in the EU.
Distance Sales of Goods and ESS: The intra-community vendors and suppliers of ESS can utilize the EU-wide threshold of EUR 10,000, covering intra-EU distance sales and supplies of ESS to EU customers. They could apply domestic tax rules to these transactions if their turnover is below the threshold. If this isn’t a valuable solution, they can opt to adhere to the OSS system voluntarily.
Exceeding the Distance Sales Threshold: For EU-based vendors with a turnover exceeding EUR 10,000, the destination principle is considered when determining the place of supply for the delivery of ESS.
How much is VAT in Luxembourg for Electronically Supplied Services?
VAT rate Luxembourg: A standard VAT rate of 17% is applied in most cases on sales of Electronically Supplied Services in Luxembourg.
Example of taxable ESS in Luxembourg: |
Supply of digital products, such as software, connected changes, and updates of the software; |
Website supply, web-hosting, distance maintenance of programs and equipment; |
Supply of music, films, and games, including games of chance and gambling games; |
Supply of distance learning; |
Access or download of music to a physical device; |
Access or downloading of images, jingles, films, ringtones, and other audio output. |
E-Commerce VAT Rules in Luxembourg
On July 1, 2021, EU regulators implemented significant amendments to the EU VAT Directive. These modifications primarily addressed simplifying the rules surrounding E-commerce space and related platform economy. From a business perspective, this was a more than welcome move, long-awaited considering the fastly growing pace under which the digital economy grows.
Significant Changes to the EU VAT Directive from the 2021 Reform:
Cross-Border Sales of Low-Value Goods: The amendments introduced a unified threshold of EUR 150 for importing low-value goods in consignments from third countries or territories.
Intra-Community Distance Sales: The previous national thresholds for intra-community distance sales have been removed, simplifying VAT obligations for non-resident sellers and reducing compliance complexity.
Domestic Sales by Deemed Suppliers: In specific scenarios, digital platform operators are now responsible for charging, collecting, and reporting VAT to tax authorities. This shift in VAT compliance duties from the original vendor to the digital platform operator streamlines the process.
Provision of B2C Electronically Supplied Services (ESS): The scope of services that could be reported under the common scheme has been expanded, making VAT reporting more manageable for businesses engaged in cross-border activities.
Improvements for uniform reporting systems:
Alongside revising the taxability rules for different types of B2C transactions, the latest EU VAT reform from 2021 introduced the below-mentioned changes concerning simplified reporting systems.
These include the presentation of the new One-Stop Shop (OSS) scheme and the Import-One-Stop Shop (IOSS) scheme and the expansion of the scope of the two previously established schemes. These initiatives aim to streamline VAT reporting and compliance across the EU, making the related tax and legal challenges less costly and confusing for the impacted parties.
The E-Commerce VAT package made the following special schemes available:
- Union One-Stop-Shop Scheme;
- Non-Union One-Stop-Scheme;
- Import One-Stop-Shop Scheme.
Overview of EU VAT Special Schemes
Conditions for Using the Non-Union OSS
The Non-Union OSS can be leveraged only by vendors whose place of establishment is outside the EU. The taxable persons with a place of establishment in one or more MS cannot adhere to this simplified reporting scheme.
The E-commerce reform also expanded the scope of the B2C transactions that can be reported under this scheme. Vendors should be previously registered to access the benefits of the simplified reporting tool. The scheme permits suppliers to report all their B2C provisions of services to EU end customers.
Conditions for Using the Union OSS
Taxable persons established in Member States can utilize the Union OSS scheme to report their intra-community distance sales of goods and provision of cross-border B2C services. Non-EU-based taxable persons can also adhere to this scheme by reporting all their intra-community distance sales of goods to customers within the EU.
Conditions for Using the Import One-Stop-Shop (IOSS) Scheme
The Import One-Stop-Shop (IOSS) simplified scheme can be used by taxable persons whose place of establishment is within the EU as well as outside the EU. This scheme permits their users to report import VAT on low-value goods for imports coming from third countries and third territories.
It makes burdensome customs and fragmented tax reporting less challenging by permitting suppliers to remit the VAT at the point of sale rather than at the import point.
Positive Impact of the OSS
The enlargement of the simplified reporting system for transactions where the purchaser is an EU resident has significantly reduced the compliance costs that cross-border operating businesses will experience.
OSS Return and Payment
Luxembourg has not created a distinct simplified reporting system for non-resident digital service providers. The national legislative framework has been adjusted by adopting the harmonized provisions from the EU VAT Directive that cover the section designed for the E-commerce sector.
This coherence still makes things much simpler for foreign providers of digital services when the place of supply is within Luxembourg. It permits non-established sellers to access the OSS schemes and, in this way, operate as registered taxable persons under OSS to eliminate the requirement for local VAT registration for their LU sales.
The introduction and subsequent national implementation of the OSS schemes under the EU VAT Directive have greatly minimized the required VAT registrations and reduced compliance burdens for foreign providers of digital services and those engaged in intra-community distance sales of goods.
The users of the OSS schemes should be aware that even if they are registered for one or a few special OSS schemes, it doesn’t remove any chance for potential mandatory registration. More than a few situations could trigger the registration process requirements.
One of those situations could be connected with the type of service provided or the type of the purchaser.
OSS Return – In case Luxembourg is the Member State of Identification (MSI) | |
VAT Return Name | One Stop Shop Scheme (OSS) |
Reporting Period | Quarter |
Submission Deadline | Q1-April 30; Q2-July 31:Q3-October 31; Q4-January 31 |
Payment Deadline | It is the same as for the electronic submission of the declaration |
Payment Currency | EUR |
Language | French, German, or English |
Tax Representative | For Union and Non-Union Scheme – No IOSS – if the taxable person is established outside the EU – Yes |
Input Tax Credit | Not allowed in the OSS return |
Archiving | Ten years |
Electronic Platform and Deemed Supplier Rules
Luxembourg has harmonized its national legislative framework with the provisions stemming from the EU-wide E-commerce package adopted on July 1, 2021. These updates have notably reduced compliance and administrative costs for non-resident taxable persons supplying goods and services to Luxembourg customers.
The amendments presented by the E-commerce reform introduced the concept of the deemed supplier for the digital platform operator. The digital platform operator assumes responsibility for VAT compliance duties for B2C transactions instead of the original vendor. The exhaustive list of the types of transactions for which this shift is permissible is defined in the EU VAT Directive.
In practice, this shifts VAT responsibilities from the original vendor to the platform operator in specific scenarios:
Import of Low-Value Goods: When EU and non-EU established suppliers sell imported low-value goods to EU customers via digital marketplaces.
Sales of Goods Within the EU: When the non-EU established vendors supply goods already in free circulation in the EU to the customers based in the Member State/s, no matter the value of the supply.
When certain conditions are met, the deemed supplier rule is triggered. This effectively transfers the VAT liability from the original vendor to the digital platform operator. Consequently, the marketplace becomes responsible for fulfilling the VAT obligations typically handled by the original merchant.
This multi-sided transaction is comprised of two parts:
- Business-to-Business (B2B): The initial transaction from the original vendor to the digital marketplace is an exempted or zero-rated B2B transaction;
- Business-to-Consumer (B2C): The subsequent transaction from the marketplace to the end consumer is categorized as a B2C transaction.
This rule streamlines the reporting processes for both online vendors and digital platforms.
Invoice Requirements in Luxembourg
General invoice information:
- Date of invoice issuance;
- Date of the supply of goods or provision of services if different from the date of the invoice issuance;
- Unique invoice numbers issued in sequence.
Seller information:
- Company name;
- Full address(head office);
- Billing address if different from company address;
- VAT number;
- The words “Register of Commerce and Companies, Luxembourg” or the initials “RCS Luxembourg” followed by the registration number;
- The establishment authorization number.
Customer information:
- Name;
- Full address;
- VAT number;
- Delivery address;
- The billing address is different from the delivery address.
Fiscal Information:
- Description and breakdown of the goods or services – quantity, discounts, unit price, excl. VAT;
- Total without VAT;
- VAT amount;
- The VAT rate(s) applied and the breakdown of VAT per rate;
- Invoice Total.
Additional information required in particular cases:
- Exemption reference – guaranteed by precise norm;
- Reverse charge – term if applicable;
- Self-billing – term if applicable;
- Tax Representative information for non-resident business.
Foreign Currency Invoice in Luxembourg
In Luxembourg, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR.
VAT Return in Luxembourg
Domestic returns
Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Luxembourg rules, in general, submit declarations:
- Monthly;
- Quarterly;
- Annually.
Penalties for late reporting and omitted declarations
Taxpayers should charge Luxembourg VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame.
If a taxable person makes a late payment, late registration, or erroneous declaration, different types of penalties could be assessed against the non-compliant taxable person.
Fine in the value between EUR 250 to 10,000 for non-compliance with the following obligations:
- The requirements linked with the proper VAT registration;
- Late submission of VAT returns;
- Late submission of summary statements.
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