The Grand Duchy of Luxembourg’s Value Added Tax (VAT) system came into effect in January 1970. The basic VAT Law of 12 February 1979 is based on EU VAT directives, as the country is a member of the European Union.
VAT is collected by the Registration and Property Administration (Administration de l’Enregistrement, des Domaines et de la TVA) which is separate from the direct tax administration.
Standard VAT Rate: 17%
There are four VAT rates in Luxembourg apart from zero-rated VAT, which are the following (excluding the special flat rate applicable to the agricultural and forestry sector).
The Standard VAT Rate in Luxembourg is 17%. It is applicable to supplies of all goods and services that are not listed among the reduced-rated supplies. It is the lowest standard rate in the European Union.
Reduced VAT Rates: 3% | 8% | 14%
The super reduced rate of 3% applies to certain foods, water supply, certain medicinal products, newspapers, books, etc.
The reduced rate of 8% is applicable to cleaning, hairdressing, minor repair of bicycles, shoes, leather goods etc.
The intermediary rate of 14% applies to washing and cleaning products, certain types of fuels, wines of fresh grapes with 13% vol. or less, etc.
Taxable persons have to register for VAT within 15 days from the date on which they start their activities unless they are formally excluded from this obligation.
Taxable persons whose annual turnover excl. tax during a calendar year has not exceeded EUR 35,000 benefit from a VAT exemption
The following must register for VAT
• A person established in Luxembourg who undertakes a taxable activity
• A person established in Luxembourg who assumes that their annual turnover will exceed EUR 35,000
• Any non-taxable legal person making intra-Community acquisitions of goods for an annual amount in excess of EUR 10,000 excl. tax
• Any person established in Luxembourg who is subject to the agricultural and forestry flat-rate taxation scheme
• Any person established in Luxembourg who supplies wine, sparkling wine, wood or capital goods for an annual amount in excess of EUR 35,000
• Any person established and registered for VAT in another EU Member State who carries out supplies of goods, including the dispatch or transport, to persons not registered for VAT and established or domiciled in Luxembourg, for an annual amount in excess of EUR 100,000 (i.e. businesses performing distance sales).
The registration for VAT must take place
• Within 15 days of the start of the activity for taxable persons that are not exempt from registration
• Before the first day of the month following the month in which the tax exemption limit is exceeded (during the same calendar year)
• For taxable persons exempt from registration and for legal persons not liable for VAT, before the following operations are carried out:
o Provision of services in another EU Member State for which only the buyer is liable for VAT
o Intra-Community acquisitions of goods subject to VAT in Luxembourg
o Purchase of services from providers established outside Luxembourg and where the buyer is liable for VAT.
In principle, taxable persons must pay the net amount of VAT (i.e. the positive result between the total of output VAT for one period minus the total of input VAT) before the 15th of the month following the end of the tax period. For this purpose, they must in principle file a return within the same interval.
For those taxpayers who submit only Annual return the deadline is before 1 March of the following year.
For those taxpayers who submit Monthly/Quarterly return besides Annual return, the deadline of submitting Annual return is before 1 May of the following year.
The net turnover of the previous year should be considered. In case of a new entity the turnover should be estimated.
The following information should be indicated on invoices in Luxembourg:
Our VAT technology platform, Comply helps business manage complex, country specific tax requirements including Luxembourg’s VAT obligations.
Using AI and machine learning, our technology puts your VAT data through over 300 automated VAT rules, checking for errors, and preparing VAT returns for approval and submission. Comply provides a full audit trail for the Luxembourgian Tax Authorities.
Appointing a VAT representative is optional in Luxembourg. If a non-resident business has VAT representation, all VAT obligations are transferred to a specialized resident operator.
The appointment of a VAT representative is possible in respect of the following transactions:
The VAT representatives and the taxable person are jointly liable for the payment of the VAT, interest and penalties.
Since January 2020, all VAT returns – whether they are filed monthly, quarterly or annually – must be submitted electronically through eCDF system.
Extended Filling Deadline
On case of monthly and quarterly return two-months extension is automatically granted by the Tax Authority. Regarding Annual return, the automatic extension is 8 months.
Since 1 July 2021, VAT exemption on low value goods has been eliminated. Since that date, all sales of goods imported in the EU are subject to the VAT of the country of destination of goods, regardless of the value of the imported goods.
For sales of imported goods with a value lower than or equal to EUR 150, the seller can declare and pay the VAT due in all Member States with a single VAT administration by using the IOSS (“Import One Stop Shop”). He may then sell the goods VAT included to his buyer.
The IOSS system concerns distance sales of goods:
If the seller opts for the IOSS to declare sales to private individuals, he must:
If the seller does not opt for the IOSS, the individual buyer must pay the VAT due on import as well as any administrative fees to the carrier delivering the goods to him, at the time of receipt of his order.
The OECD has defined a standard audit file format (SAF-T) for tax audits and a standard set of tests to be performed during an audit. Luxembourg is one of the countries which have implemented the SAF-T.
In Luxembourg, the predefined file is called the “Registration Administration computerized audit file” (FAIA) and is largely modelled on the OECD “Standard audit file-Tax”. In principle , the VAT Tax Authorities can request a FAIA compliant file for the taxable years starting 2011. Every VAT inspector has the discretion to demand the file at the occasion of an audit. Currently, the scope of FAIA includes businesses that are subject to the Luxembourg Standard Chart of Account (hereinafter “SCA”).
The following type of companies are in scope of the SCA:
• Corporate entities with limited liabilities (SA, SARL, SCA, Société Coopérative, SE)
• Individual business owners, General Corporate Partnerships (SNC) and Limited Corporate Partnerships (SCS), if their annual turnover exceeds EUR 100,000 (exclusive of VAT)
• Branches and establishments set up in Luxembourg by businesses governed by foreign law.
The format for the FAIA file should be XML. For any additional information requested, other formats are also accepted by the VAT authorities, if the files are easily legible.
The Luxembourg FAIA file covers the records directly or indirectly relevant to verify the correctness of the VAT reporting , and that the company keeps electronically. The obligatory and facultative fields of the Luxembourg FAIA file are based on the OECD’s SAF-T version 2.0., available on the website of the VAT authorities.
In principle, every natural or legal person established in Luxembourg who trades in goods with other EU Member States (intra-Community operators) must provide statistical information about these exchanges to the STATEC.
Based on the VAT returns filed, STATEC is aware of Intra-Community movements of goods and send a notification to the taxpayer to inform of obligations.
No declaration must be submitted if the annual turnover is lower than EUR 200,000 for arrivals and EUR 150,000 dispatches. It is required to declare as soon as it exceeds one of the following thresholds:
Deadlines and Filing Frequency
Businesses must declare their intra-Community exchanges on a monthly basis at the latest:
In Luxembourg, these declarations must be made to the Intrastat Department of the National Institute for Statistics and Economic Studies (Institut national de la statistique et des études économiques – STATEC).
Businesses may send their reports In paper format or electronically through the IDEP software package.
Contact Taxback International today to find out how we can help you with your VAT Compliance requirements.
We fully manage all of your VAT obligations across multiple countries, wherever they arise.
Our VAT Compliance technology delivers full visibility over your historic and current global VAT activities.
Our combination of knowledge-based technology and our in-house VAT experts ensure 100% VAT compliance.