Scope and Rates
Value-added tax (VAT) is due on any supply of goods or services made in Luxembourg, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried out independently by any person or legal entity on a regular basis. Supply includes all forms of supply. It is not restricted to the provision of goods and services by way of sale but can apply equally to other forms of transaction, including the leasing or hire of goods, the grant, assignment, or surrender of a right, an agreement not to carry out a business, or perform services.
Supply does not include anything done otherwise than for a consideration. However, certain actions carried outfor no consideration are deemed to be supplied; for example private use of business assets and free gifts.
The Luxembourg standard rate of VAT is 15 percent.
Yes (please note that the lists set out below are non-exhaustive). There is an intermediary rate of 12 percent for certain goods and services, including:
- some wines
- fuel other than gas and electricity (solid mineral fuels, mineral oils, and wood intended for use as fuel)
- commercial printings
- custody services
- heat, refrigeration, and steam excluding heat furnished by a heating system
- management of credits and credit guarantees by a person or an institution other than those who are granting the credits.
In addition, there is a reduced rate of 6 percent for certain goods and services, including:
- electricity
- gas
- heat furnished by a heating system
- plants
- repairs on items such as bikes, shoes, leather articles, etc
- hairdressing
- alterations to clothes and household linen cleaning of private housing
There is a further reduced rate of 3 percent for certain goods and services, including:
- human and animal food excluding alcohol drinks
- (e-)Books (excluding advertising and pornographic content), newspapers, and periodicals
- children's shoes and clothing
- passenger transport
- hotel accommodation
- certain sporting and cultural services
- burial and cremation
- therapeutic instruments and medical equipments for disabled persons
- certain pharmaceutical products
- foods and drinks to be consumed on the spot
- collection and processing of domestic waste
- copyrights
- construction and renovation costs for personal dwellings (under certain conditions)
- distribution of water
- reception of radio and television broadcasting services other than those whose content is exclusively addressed to adults regardless of the electronic communication network used (since 1 January 2008).
The list of zero-rate supplies includes:
- exports
- intra-community supplies of goods
- supplies of goods and services used by airlines operating for reward chiefly on international routes
- services supplied for the needs of seagoing vessels
- goods and services supplied under diplomatic and consular arrangements, and to recognized international organizations
- international passenger transport.
The list of exemptions includes:
- certain banking and financial services
- management of investments funds, SICAR, some pension funds, and securitization vehicles under specific conditions
- insurance and reinsurance
- supply and letting of immovable property (there is an option to tax under certain conditions)
- postal services
- betting, games of chance, and lotteries
- education
- certain medical supplies.
It is in principle not possible to recover VAT incurred in making exempt supplies. However, in some particular circumstances, a recovery right might exist despite the existence of a Luxembourg VAT exemption.
Excise duties ,stamp duties, customs duties.
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Registration
Luxembourg Entities
Any person established in Luxembourg who independently carries out any economic activity is deemed to be a VAT taxable person and, in principle, should therefore be registered for VAT purposes in Luxembourg within 15 days of the effective start of the activity. Please note that a person only performing VAT exempt activities may be relieved from the required VAT registration in Luxembourg unless it is liable to self-account for Luxembourg VAT on services received from abroad falling within the scope of the reverse charge mechanism or performs intra-Community acquisitions of goods above the threshold of EUR 10,000 per year.
Non-Luxembourg Entities
The registration rules that apply to Luxembourg entities also apply to non-Luxembourg entities which are making taxable supplies in Luxembourg. However, there is no minimum VAT registration threshold for businesses not established in Luxembourg.
If a business is not registered for VAT in Luxembourg but sells and delivers goods from another European Union (EU) Member State to customers in Luxembourg who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of EUR 100,000, it is required to register and account for VAT in Luxembourg.
If a business is established outside the EU and renders electronically supplied services to customers in Luxembourg who are not VAT registered, then the place of supply is in principle Luxembourg. Business will then have to register for Luxembourg VAT. If, however, it supplies the same services to customers in other EU Member States , it can opt to register for VAT in one Member State rather than all of them. In this case business must still account for VAT on supplies at the rate prevailing in the country of its customer but it must only deal with one Member State for filing and payment purposes.
Access the VAT registration forms on the Luxembourg tax authority’s web site: http://www.aed.public.lu.
Failure to register for VAT promptly may result in a penalty of between EUR 50 – EUR 5,000. Please note that this penalty shall apply not only to failures to register but to any other infringement of Luxembourg VAT requirements. Besides, absence or late payment of the VAT due may give rise to an additional penalty amounting to 10 percent of the entire VAT due.
Moreover, notwithstanding penal sanctions, any person who has fraudulently tried to avoid the payment of VAT or has illegitimately recovered VAT is punishable by a penalty of 10 percent of the VAT evaded.
No, as explained in the first question before an overseas company should necessarily be registered from the moment the company performs taxable supplies in Luxembourg.
As a consequence, an overseas company cannot ask for the registration in Luxembourg if it does not carry out transactions falling within the scope of Luxembourg VAT for which it is liable to pay the VAT.
It is possible to avoid registering and accounting for Luxembourg VAT when making certain supplies.
In the following examples the obligation to account for the VAT due can be shifted to the customer provided that the latter is registered for Luxembourg VAT.
Triangulation
If a business is an intermediate supplier to a Luxembourg buyer of goods which it purchases from a business in an other EU Member State other and are delivered from there to Luxembourg, VAT due can be accounted for by Luxembourg customer (see section Invoices).
Imports
Taxable persons performing imports of goods in Luxembourg and subsequent sales/processing which are neither established nor registered for VAT purposes in Luxembourg can opt to appoint a VAT representative in Luxembourg (since 1 January 2008).
Call-Off Stock
No simplification provisions apply.
Capital Items
The sale of capital items is not included in the calculation of turnover for Luxembourg VAT registration purposes.
Supply and Install
No simplification provisions apply.
Reverse Charge Services
Since 1 January 2010 the supply of services by a foreign supplier to a Luxembourg taxable person abroad has fallen under the reverse charge mechanism which is covered in more detail at section International Supplies of Goods and Services.
See above under “ Imports”.
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VAT grouping
Not as such, but VAT exemption for cost-sharing association (independent group of person) may apply (article 132, 1 (f) of the Council Directive 2006/112/EC; article 44, 1 y) LVAT) provided various criteria are met and that competition is not distorted. Note that the members of the VAT group do not become a single taxable person, so charges between them are not disregarded.
The main conditions are as follows:
- Transactions covered: certain services rendered by independent groups to their members are VAT exempt. The services must be directly necessary for the exercise of the activity of the members. However, it is no longer required for all members to receive all services performed by the group.
- Status of the group: it is not required that the group is legally incorporated but it must act independently under its own separate name when dealing with its members.
- Status of the members: members of the group must exercise the same type of activity or belong to the same financial, economical, professional or social group. All group members must be established within the European Union. They must carry out VAT-exempt activities (insurance companies, banks, fund management companies, hospitals, etc.) or should not be subject to VAT (holding companies, public bodies, etc.). The VAT exemption remains applicable, however, if a member or members perform taxable business provided the turnover of such business does not exceed 30 percent of the total turnover. Exceeding this limit does not, however, jeopardize the benefit of the VAT exemption to the extent it does not exceed 50 percent of this 30 percent and only for a maximum of two consecutive years.
- Sharing of costs incurred by the group: the group must claim from its members the exact reimbursement of their share of the joint expenses.
Only EU-based entities can be members of above-mentioned independent group of persons.
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Returns
Most registered businesses are required to submit VAT returns on a monthly basis. However, if the annual turnover is between EUR 112,000 and EUR 620,000, VAT returns are submitted on a quarterly basis. If the annual turnover does not exceed EUR 112,000, the VAT returns must be submitted on an annual basis only.
In addition, all businesses which are required to submit VAT returns on a monthly or quarterly basis, must in addition submit an annual summary VAT return.
Failure to submit VAT returns or settle any outstanding VAT on time may result in a penalty of between EUR 50 to EUR 5,000. Moreover, late payment or failure to pay VAT due may be subject to late payment interests.
European Sales List (ESL)
If a business supplies goods which are shipped from Luxembourg to VAT registered businesses in other EU Member States and wants to zero rate the supply (see section International Supplies of Goods and Services) it is required to file ESLs.
In principle, ESL for goods must be submitted on a monthly basis, although quarterly submissions is allowed if the total amount of intra-Community deliveries of goods does not exceed EUR 50,000 during the quarter concerned or in respect of the four previous quarters. if the EUR 50,000 threshold is exceeded in a single quarter, the taxable person is automatically required to submit listings on a monthly basis for the remaining months of the quarter and for at least the four following quarters.
ESLs are also mandatory for the supply of services which are rendered by Luxembourg taxable persons to VAT registered business customers established in other EU Member States and which are not VAT exempt in those Member States. The taxable person can make submissions on a monthly or quarterly basis (no threshold). The frequency for ESL for services is not linked to the period for filing ESL for goods.
In case of monthly submissions for goods and services, the ESL must be submitted electronically. For quarterly submissions, the ESL can be submitted either on paper format or electronically. The deadline for filing the listings is the 15th day of the month following the reporting period if the listing is submitted in paper format and the 25th day of the month following the reporting period if filed electronically.
Intrastat Declarations
VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States, which exceed a certain threshold (EUR 150,000 per calendar year for the dispatches, EUR 200,000 per calendar year for the acquisitions) must complete Intrastat declarations each month.
The late submission of Intrastat returns may result in a penalty of between EUR 251 to EUR 2,500.
Access Intrastat returns on the Department of Statistics web site: http://www.statec.public.lu/fr/index.html.
Pursuant to article 37 VATL, the exchange rate applicable should be the last exchange rate as admitted by the Luxembourg Central Bank or other accredited banks based on the rates set out by the European Central Bank at the time the VAT is due.
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VAT recovery
Yes. Businesses established in other EU Member State can make a claim under Directive 2008/9/EEC of 12 February 2008. Non-EU business should recover the VAT under the 13th Directive.
Under both of these provisions there are strict time limits and minimum thresholds for making claims. Under the Directive 2008/9/EEC , the claim period must not be longer than one calendar year but must cover at least three months, unless it relates to the end of a calendar year. Claims for less than a full year but more than 3 months must be for at least EUR 400. Annual claims or claims in respect of the last part of the year must be for at least EUR 50. Under the 13th Directive, the claim period must cover the calendar year and must be for at least EUR 250.
Please note that 13th Directive reclaim should be filed in Luxembourg when Luxembourg VAT has been incurred by the requester. Reclaims based on Directive 2008/9/EEC should be filed in the country where the requester is established (i.e. Luxembourg) for all non-Luxembourg VAT incurred.
This request has to be made electronically through Luxembourg VAT authority’s web portal.
The deadline to submit the claims is 30 June of the following year for 13th Directive claims whereas it is 30 September for claims based on Directive 2008/9/EEC.
Access the Directive 2008/9/EEC claim portal on the Luxembourg tax authority’s web site:
http://www.vatrefund.lu
Access the 13th Directive claim forms on the Luxembourg tax authority’s web site:
http://www.aed.public.lu
No reciprocity rules apply as such. However, the taxable person or legal entity applying for a VAT refund in Luxembourg shall submit together with the fund reclaim, either a statement proving that an economic activity is carried out in the home country or a certificate provided by the home country stating its VAT (or any equivalent turnover tax) reference.
Yes. There are certain items that businesses cannot recover VAT on. For example:
- Exempt supplies:where VAT relates to both taxable and exempt supplies without credit, businesses need to make an apportionment.
- Non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required.
- Motor cars (excluding commercial vehicles): where cars are used for business and private purposes, related input VAT is in principle recoverable but output VAT is due on private use determined according to effective use, lump-sum computation is also allowed according to current practice.
- Business entertainment: VAT on expenses that do not strictly qualify as business expenses, such as luxury or entertainment expenses may not be recovered.
- Purchases falling within the Tour Operators’ Margin Scheme: the VAT on goods and services which fall under this scheme cannot be reclaimed.
- Goods sold under one of the margin schemes for second hand goods: there are a number of schemes which provide for VAT to be accounted for on the goods’ sales margin, but do not allow VAT recovery on the purchase of those goods.
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International Supplies of Goods and Services
Goods
If a business sells goods to a customer who is registered for VAT in another EU Member State and the sale involves the dispatch or transport of those goods from Luxembourg (either by the business or its customer) to that other EU Member State, then it does not need to charge VAT and may zero rate the supply as an intra-EU dispatch. Businesses must obtain their customer's VAT number and quote it on the invoice. It should also obtain evidence of the goods' removal from Luxembourg.
If a business sells goods to a customer who is not registered for VAT in another EU Member State, it must charge Luxembourg VAT. If the sales exceed a certain threshold for that Member Stateit may have to register in the Member State under what is known as the Distance Selling Scheme.
If a business exports goods to a customer (business or private) outside of the EU, then it does not need to charge VAT; but, as for intra-Community sales, itshould make sure that in all cases to keep proof of dispatch/delivery to support the zero rating.
Services
In the case of a Luxembourg established business suppling services to a foreign business customer (B2B), in general the supply of services is taxable in the country of the recipient under the reverse charge mechanism. If the company supplies services to a private consumer (B2C), the services are in general taxable in the country of the supplier and therefore subject to Luxembourg VAT.
The following exceptions apply to the B2B and B2C main rules as described above:
- services involving real estate (taxable in the country where the real estate is located)
- restaurant and catering services (taxable in the country where these services are performed. Other rules apply if these services are performed on board a ship, aircraft, or train).
- passenger transport (taxable in we country here the transport services are actually performed).
- services with regard to admission to cultural, artistic, sporting, scientific, educational, entertainmentand similar activities, along with the ancillary services (taxable in the country where those activities are physically carried out).
- short term hiring of transportation vehicles (for ships maximum 90 days / for other means of transport maximum 30 days; taxable in the country where the vehicle is actually put at the disposal of the customer
- the supply of telecommunication, radio and television broadcastings services is subject to the use and enjoyment rules under certain particular circumstances.
The supply of transport of goods as well as the ancillary services to the transport of goods, that would be located in Luxembourg by virtue of the general localization rule, should be deemed to be located outisde EU when the actual use and enjoyment of those services is outside the EU.
The following exceptions apply to the B2C main rule:
- intermediary services (taxable in the country where the underlying transaction is taxable).
- intra-Community transport of goods (taxable in the country of departure). For other types of goods transportation for non-taxable customers, the place of service is the place where the transportation is actually performed.
- services relating to cultural, artistic, sporting, scientific, educational, entertainment and similar activities will be taxed at the place where those activities actually take place
- transportation-related services (taxable in the country where the services are physically carried out).
- services involving movable tangible goods (taxable in the country where the activities are actually carried out).
- services performed electronically by a VAT entrepreneur not established in the EU to non-taxable customers (taxable in the country where the customer of the service is located).
The following services performed for non-taxable customers that are established or resident outside the EU are taxable in the country where the customer is established:
- the transfer of licenses and similar rights
- advertising services
- services performed by consultants, as well as data-processing and information-provision
- services
- the obligation to refrain, in whole or in part, from pursuing a business activity
- banking and insurance services
- supply of staff
- hiring out of movable property, with the exception of means of transport
- operating natural gas and electricity-distribution systems
- telecommunications services
- radio and television broadcast services and services performed electronically.
When goods are imported into Luxembourg from outside the EU, import VAT and customs duty may be due.
VAT due on import might be physically paid upon import but in principle should be reported in the VAT return of the period.
Since 1 January 2010, the reverse charge mechanism has been generalized and applies to all services bought in from outside Luxembourg, except if an exception applies based on the nature of the services.
If a business buys in services rendered by a supplier established outside Luxembourg as a taxable person, it is required to apply the reverse charge unless a VAT exemption is applicable or a service received is an exemption to the general rule. This is intended to take away any VAT advantage of buying those services from outside Luxembourg.
Under the reverse charge, companies are required to self-account for the Luxembourg VAT through the VAT returns, unless a VAT exemption applies.
If the taxpayer is entitled to fully recover input VAT paid, the reverse charge should be a cost factor but a VAT compliance matter. However, if the companby’s activities are partly VAT exempt, there should be a VAT cost depending on the level of recovery allowed under the partial exemption method.
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Invoices
Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party:
- supplies of goods or services which he has made to another taxable person or to a non-taxable legal person, and that are not exempt by virtue of article 44 VATL
- supplies of goods as referred to in Article 33 of Directive 2006/112/EC
- supplies of goods carried out in accordance with the conditions specified in Article 138 of Directive 2006/112/EC
- any payment on account made to him before one of the supplies of goods referred to in points (1), (2) and (3) was carried out
- any payment on account made to him by another taxable person or non-taxable legal person before the provision of services was completed.
A tax invoice should contain the following data:
- date of issue
- a sequential invoice number. If the invoice adjusts an earlier invoice (such as a credit note), unambiguous reference should be made to the original invoice
- supplier's VAT identification number
- where the customer is liable to self-account for and pay the tax on goods supplied or services rendered, its VAT identification number under which these supplies were performed (services supplied under the reverse charge mechanism, intra-Community deliveries of goods and triangular sales)
- supplier's name and address
- customer's name and address
- the quantity and nature of the goods/services supplied
- the date on which the supply of the goods or services was made or completed or the date on which an advance payment was made, insofar as that date can be determined and differs from the date of issue of the invoice
- the taxable amount per rate or exemption
- unit price (exclusive of any VAT)
- rate of any discounts (if not included in the unit price and if applicable)
- the VAT rate applicable
- the amount of VAT payable in Euro, except where a specific regime is applied and for which the VAT law excludes such a detail (examples include margin regime and special regime for small enterprises)
- where an exemption is applicable or where the customer is liable to pay the tax, a clear reference to the appropriate provision of the EU VAT Directive, or to the corresponding provision in Luxembourg VAT law, or to any indication that the supply is exempt or subject to the reverse charge procedure
- where the intra-Community supply of a new mean of transport is involved or where the margin scheme applies, the invoice must contain other specific information
- amounts appearing on invoices may be expressed in any currency provided that the amount of VAT payable is expressed in Euro
- invoices may be drafted in any language provided that the VAT due is computed in Euro in accordance with the last exchange rates as admitted by the Luxembourg Central Bank or other accredited banks based on the rates set out by the European Central Bank. Note that a French or German translation may be required in case of audit.
Yes. The invoice's authenticity of origin and the integrity of its contents must be ensured either by advanced electronic signature or by Electronic Data Interchange (EDI) as defined in the recommendation 1994/820/CE issued by the European Commission.
Yes, provided the customer has the agreement of your supplier before doing so.
Yes provided that the VAT amount is also expressed in Euro by using the exchange rate method foreseen in article 37 VATL.
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Transfers of Business
Yes. If a company sells its business as a going concern, then VAT may not be due. There are certain conditions to be met, for example the purchaser should intend to use the assets to carry on business.
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Options to Tax
There is an option to tax the supply and letting/leasing of immoveable property.
In order to apply VAT on the transactions, the supplier must meet certain conditions and complete certain formalities according to article 45 of the VAT Law and to the Grand Ducal Decree dated 7 March 1980.
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Head Office and Branch transactions
Supply of services between head office and a branch are disregarded for VAT purposes.
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Bad Debt
Businesses are able to claim back VAT on the unpaid element through their VAT return. If the taxpayers subsequently receive payment for the supply, they must pay back the VAT amount to the tax authorities in the same way (i.e. through the VAT return).
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Anti-Avoidance
No, but there is use and enjoyment provisions for some services.
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Penalty Regime
Failures in relation to compliance obligations (such as, filing of VAT returns, issuing of invoices, keeping records, paying VAT, proper bookkeeping, registration, provision of information to the tax authorities, etc.) may result in a penalty of between EUR 50 to EUR 5,000 per infringement.
In cases of fraudulent activity, notwithstanding penal sanctions, a fine which could amount to 10 percent of the tax eluded could be applied.
In addition, late payment or failure to pay VAT due may be subject to a VAT fine for late payment that may not exceed 10 percent per year of the tax due.
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Tax authorities
How often do tax audits take place?
The frequency of the VAT audits is not precised in the Luxembourg VAT law. In the past, VAT audits used to be performed by the Luxembourg VAT authorities every 3-4 years. However, based on the current trend, VAT audits become more and more frequent.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
As from 2011, the standard electronic file, the “Fichier d'audit informatisé AED” ("FAIA"), was introduced in Luxembourg. FAIA will enable the Luxembourg VAT Authorities to perform faster and more efficient reviews of books and documents during VAT audits.
For the creation of FAIA, the VAT authorities have introduced an adapted version of the standard system proposed by the OECD, the SAF-T (Standard Audit File-Tax). FAIA is a standardized file that contains all information necessary for the performance of the VAT audit and may be processed by standardized VAT audit software.
FAIA is a structured XML format. There are numerous requirements regarding the structure of the file and the minimum of information the file has to contain. Above all, the file must contain general data about the company and about the software used, the general ledger (including a breakdown of transactions), information about the customers and the suppliers of the company as well as a VAT table and source documents (sales and purchase invoices and payment information).
In principle, as from 1 January 2011, the VAT authorities are entitled to request the transfer of electronic accounting data for the purpose of a VAT audit in compliance with the specifications of FAIA, from taxable persons using an electronic bookkeeping system, unless they are not covered by the FAIA obligation.
In a first step, FAIA will be mandatory for all taxable persons subject to the Standard Charts of Accounts (“SCA”) regulation. Taxable persons not subject to the SCA regulation are thus not required to comply with the new requirements.
Moreover, the following taxable persons, albeit subject to the SCA regulation, will be excluded from the obligation to provide "FAIA-compliant" electronic files to the VAT authorities:
- taxable persons subject to the simplified VAT regime;
- taxable persons whose annual turnover does not exceed EUR 112,000;
- taxable persons whose number of accounting transactions is reasonable (+/- 500 transactions) and for whom a manual VAT control is more rational than the transmission of an electronic file.
In a second phase, FAIA will be mandatory for all taxable persons using an electronic bookkeeping system. A starting date for this second phase is yet to be specified by the VAT authorities.
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Taxable persons cannot apply for formal or informal advance rulings from the Luxembourg VAT authorities.
Are rulings and decisions issued by the tax authorities publicly available in your country?
Circulars reflecting the authorities’ approach one some topics are available on the website of the Luxembourg VAT authorities.
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Miscellaneous
N/A.
- since 1 January 2012, reduced rate are also applicable on e-books (3 percent)
- creation of VAT free zones (provisional VAT exemption for eligible goods under the regime).