VAT, GST and Sales Tax in Luxembourg

Summary

Name of the tax Value-added tax (VAT)
Local name Taxe sur la valeur ajoutée (TVA)
Date introduced 5-Aug-69
European Union (EU) Member State Yes
Administered by Ministry of Finance (http://www.aed.public.lu)
VAT rates
Standard 17%
Reduced 3%, 8% or 14%
Other Exempt without credit and exempt with credit
VAT number format LU12345678
VAT return periods
Monthly Turnover of more than EUR620,000
Quarterly Turnover between EUR112,000 and EUR620,000
Annual All taxable persons, including those with turnover below EUR112,000
Thresholds
Registration None
Distance selling EUR100,000
Intra-Community acquisitions EUR10,000
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Luxembourg by a tax­able person
  • The intra-Community acquisition of goods from another EU Member State by a taxable person or nontaxable legal person (see the chapter on the EU)
  • The importation of goods from outside the EU, regardless of the status of the importer

Who is liable

A taxable person is any business entity or individual that carries out economic activities independently and regularly. Economic activities include activities such as supplies of goods or services, intra-Community acquisitions (see the chapter on the EU) and importations in the course of a business.

Effective 1 January 2010, for the purpose of applying the rules concerning the place of supply of services, a nontaxable legal person registered for VAT is regarded as a taxable person if it receives services from a taxable person. This rule does not affect the liability for and payment of the tax in the case of local sup­plies by a Luxembourg taxable person to a Luxembourg non­taxable legal person. However, for cross-border supplies of services, this rule leads to a shifting of the tax liability to a non­taxable legal person registered for VAT, which must self-assess and pay the VAT due in its country of establishment under the reverse-charge mechanism.

No VAT registration threshold applies in Luxembourg. A taxable person that begins activity in Luxembourg must notify the Luxembourg VAT authorities of its liability to register.

Special rules apply to foreign or “non-established businesses” (see Non-established businesses).

Group registration. VAT grouping is not permitted under Luxembourg VAT law. Legal entities that are closely connected must register for VAT individually.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Luxembourg. A non-established business that makes taxable transactions in Luxembourg must register for VAT, unless it is not liable for VAT (for example, because its supplies to taxable persons may be taxed using the “reverse charge” mechanism). Under the reverse charge, the recipient of the supply must account for the tax. The reverse charge does not apply to supplies of goods and services made to private persons. A non-established business must register for Luxembourg VAT if it makes any of the following supplies, which are all subject to Luxembourg VAT (unless an exemption applies):

  • Intra-Community supplies or acquisitions
  • Distance sales in excess of the threshold (see the chapter on the EU)
  • Supplies of goods and services to which the reverse charge does not apply

Tax representatives. Businesses established in the EU that are required to register for VAT in Luxembourg cannot appoint a tax representative.

Businesses established outside the EU may be required by the Luxembourg VAT authorities to provide a security deposit to secure their VAT liability. The deposit must be in the form of cash or a letter of indemnity provided by an approved bank.

The VAT registration application for non-established businesses must be sent to the following address:

Administration de l’Enregistrement et des Domaines

Bureau d’imposition 10

14, avenue de la Gare

L-1610 Luxembourg

BP 31

L-2010 Luxembourg

Registration procedures. The application file to register for VAT should be submitted in hard copy with the VAT authorities at the latest within 15 days after the start of the economic activity of the VAT taxable person. Registration on line is not possible.

The application document should be accompanied by several documents, such as a copy of the articles of association of the company, a copy of the ID cards of the Directors of the company, a copy of a rental agreement or domiciliation agreement, and possibly others. After the filing of a complete application, it usu­ally takes three to five weeks before the VAT number is actually granted.

Late-registration penalties. A penalty of between EUR50 and EUR5,000 may be assessed for late VAT registration.

Reverse charge. Except if obliged by the VAT Directive, in prin­ciple the Luxembourg VAT legislation does not foresee a reverse charge. Hence for local supplies, the supplier should charge VAT, even if it is a non-established business.

Digital economy. As from 2015, electronically supplied services are deemed to take place where the customer is established. If the customer is not a VAT taxable person, established in the EU, the supplier will be liable to charge the VAT of the countries of con­sumption and either have to register in the countries of consump­tion or to register under the Mini One-Stop Shop (MOSS) scheme.

Mini One-Stop Shop. By using the MOSS, taxpayers avoid the need for VAT identifications in other EU Member States, and the revenue realized outside Luxembourg is reported in the same VAT return. In Luxembourg companies started registering for the MOSS on 1 October 2014.

Deregistration. If a VAT taxable person stops performing the economic activity that had triggered the obligation to be regis­tered, he or she should apply for a deregistration within 15 days after stopping the activity.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are subject to VAT.

In Luxembourg, the following VAT rates apply:

  • Standard rate: 17%
  • Reduced rates: 3%, 8% and 14%

The standard rate of VAT applies to all supplies of goods or ser­vices unless a specific measure provides for a reduced rate or an exemption.

Examples of goods and services taxable at the super-reduced rate of 3%

  • Food for human consumption, excluding alcohol
  • Agricultural products
  • Books, newspapers and periodicals, including e-books
  • Shoes and clothes for children under age 14
  • Sale of domestic accommodation
  • Pharmaceutical products
  • Restaurant services, excluding alcohol
  • Water
  • Transport of persons
  • Admission to cultural events

Examples of goods and services taxable at the reduced rate of 8%

  • Liquid gas for heating, lighting and fueling engines
  • Electric energy
  • Plants and other floriculture products
  • Hairdressing
  • Repair of bicycles, shoes and other leather goods
  • Cleaning of private accommodation

Examples of goods and services taxable at the parking rate of 14%

  • Wine of grapes with a concentration of alcohol up to 13 grades
  • Solid mineral combustibles, mineral oil and wood used as fuel
  • Advertising brochures and other prints
  • Steam, heating and cooling
  • Custody and management of securities
  • Management of credits and credit guarantees by an entity other than the entity that granted the credit

The term “exempt supplies” refers to supplies of goods and ser­vices that fall within the scope of VAT but are not subject to a VAT rate. In principle, exempt supplies do not give rise to a right of input tax deduction (see Section F). Some supplies are classi­fied as “exempt with credit,” which means that no VAT is due, but the supplier may recover related input tax. Exempt-with-credit supplies include exports of goods and related services and intra­Community supplies of goods (see the chapter on the EU).

Examples of exempt supplies of goods and services (with and without VAT credit)

  • Real estate transactions
  • Supplies of postage and fiscal stamps at face value
  • Services of doctors and dentists
  • Finance
  • Insurance
  • Cultural and sporting services
  • Welfare services
  • Education

Option to tax for exempt supplies. There is no option to treat exempt supplies as taxable.

Time of supply

The time when VAT becomes due (or the chargeable event occurs) is called the “time of supply” or “tax point.” For supplies of goods, the basic time of supply is when the goods are delivered and the power of disposal is transferred. The basic time of supply for services is when the services are completed.

The actual time of supply of goods or services, with the excep­tion of services subject to VAT in the recipient country, may be delayed by the issuance of an invoice (if the issuance of an invoice is mandatory), but no later than the 15th day of the month following the month in which the basic time of supply occurs. If the supplier issues an invoice before this date, the time of supply is when the invoice is issued. Specific rules apply to continuous supplies of services. For supplies of services subject to VAT in the recipient country, the time of supply is when the chargeable event occurs (that is, when the supply is completed).

Intra-Community acquisitions. The time of supply for an intra­Community acquisition of goods is the 15th day of the month following the month in which the acquisition takes place. If the supplier issues an invoice or a document serving as an invoice (other than relating to an installment) before such date, the time of supply is when the invoice is issued.

Imported goods. The time of the supply for imported goods is the date of importation or the date on which the goods leave a duty suspension regime.

Cash accounting. Luxembourg operates a cash accounting scheme with a maximum threshold of EUR500,000.

Reverse-charge services. For supplies of services subject to VAT in the recipient country, the chargeable event occurs when the supply is completed.

Continuous supplies of services. In case the customer is liable to self-assess VAT and no statements of account are issued and no payments are made, the VAT becomes due at the end of the cal­endar year.

Prepayments. If a prepayment is made in advance of a transac­tion, and there is no obligation to issue an invoice, then VAT becomes due at the time of the prepayment. However, if there is an obligation to issue an invoice, and it is issued with the prepay­ment, then VAT is due before the 15th of the month following the month during which the transaction takes place.

Intra-Community supplies of goods. Intra-Community supplies of goods are deemed to take place at the time the invoice is issued (at the latest the 15th of the month following the month during which the supply took place or when a payment on account is received) or when the invoice should have been issued if not issued timely.

Leased assets. Not applicable.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies of goods and services made.

Input tax includes VAT charged on goods and services supplied within Luxembourg, VAT paid on imports of goods and VAT self-assessed on intra-Community acquisitions of goods and reverse-charge services (see the chapter on the EU).

A valid tax invoice or customs document must generally accom­pany a claim for input tax.

Nondeductible input tax. In Luxembourg, input tax may be deducted in full for all items of business expenditure. Input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, the private use of an entrepreneur’s home telephone or goods acquired for private use).

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Private expenditure

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Purchase, hire, lease, maintenance and fuel for cars, vans and trucks
  • Parking
  • Business gifts
  • Attending conferences, seminars and training courses
  • Business entertainment
  • Business use of home telephone
  • Advertising
  • Transport

Partial exemption. In general, input tax directly related to exempt supplies is not recoverable. If a Luxembourg taxable person makes both exempt and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.” Exempt with credit supplies are treated as taxable supplies for these purposes.

In Luxembourg, the amount of input tax that a partially exempt business may recover may be calculated by using the general pro rata method or a special deduction method.

The general pro rata method calculates the amount of recoverable VAT based on the ratio of turnover that entitles the taxable person to deduct input tax (that is, taxable turnover and exempt turnover with credit) to total turnover within the scope of VAT. Incidental supplies of capital goods and incidental real estate and financial transactions are excluded from turnover for these purposes. The recovery percentage is rounded up to the nearest whole number (for example, a recovery percentage of 77.2% is rounded up to 78%).

Alternatively, the Luxembourg VAT authorities may authorize a taxable person to use a special deduction method based on the direct allocation of all or certain goods and services used in mak­ing taxable and exempt supplies. The VAT authorities may direct a taxable person to use this method. The administration may also authorize or direct the use of a special deduction method for each sector of a single business or for certain sectors of the business.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of acquisition and first use. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial exemption recovery percentage changes during the adjustment period.

In Luxembourg, capital goods are defined as tangible, movable or immovable goods that are subject to depreciation under income tax law. They also include work that qualifies as invest­ment expenditure under the income tax law.

The capital goods adjustment applies to the following assets for the number of years indicated:

  • Immovable capital assets (primarily, buildings): adjusted for a period of 10 years
  • Movable capital assets: adjusted for a period of five years

For movable goods, the adjustment period starts on 1 January of the year in which the goods are manufactured or purchased. If the goods are first used in a later year, the period begins on 1 January of the year in which the goods are used for the first time. The adjustment is applied each year to 1/5 of the total input tax, unless the goods are sold. If the goods are sold, the adjustment is made once for the total remaining period. The adjustment may result in either an increase or a decrease of deductible input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared with the year in which the capital goods were acquired (or used for the first time).

For immovable goods, the adjustment period starts on 1 January of the year in which the acquisition takes place or construction or refurbishment work ends or on 1 January of the year in which the immovable property is used for the first time if the year of first use differs from the year of acquisition or the year in which the construction or refurbishment work is finalized. The adjustment is applied each year to 1/10 of the total input tax, unless the immovable property is sold or if the VAT deduction depends on the rental status of the immovable property. In such cases, the adjustment is made once for the total remaining period. The adjustment may result in either an increase or a decrease of deductible input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased com­pared with the year in which the immovable property was acquired, constructed or refurbished.

Refunds. If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person has an input tax credit. This input tax credit may usually be carried forward to the next reporting period. However, a refund may be requested.

Preregistration costs. Not applicable.

Write-off of bad debts. If it can be reasonably expected that the customer will not pay (or not pay the full amount), the taxpayer is entitled to reclaim the VAT on the unpaid VAT amount.

Noneconomic activities. VAT related to noneconomic activities is not recoverable.

Recovery of VAT by non-established businesses

Luxembourg refunds VAT incurred by businesses that are neither deemed to be established in Luxembourg nor registered for VAT there. A non-established business may claim Luxembourg VAT to the same extent as a VAT-registered business. However, VAT may not be recovered on private expenditure.

For businesses established in the EU, a refund is made under the terms of EU Directive 2008/9/EC. For businesses established outside the EU, refund is made under the terms of the EU 13th Directive. Luxembourg does not exclude any non-EU country from the refund scheme (no reciprocity required).

For the general VAT refund rules of the EU Directive 2008/9/EC and the EU 13th Directive refund schemes, see the chapter on the EU.

Refund application. The deadline for submitting EU Directive 2008/9/EC refund claims is 30 September of the calendar year following the refund period.

For EU Directive 2008/9/EC claims, the minimum claim period is three months, and the maximum period is one year. The mini­mum claim for a period of less than a year is EUR400. For an annual claim, the minimum amount is EUR50.

Applications for refunds of Luxembourg VAT under EU Directive 2008/9/EC must be submitted to the EU Member State in which the claimant is established via the electronic portal set up by that EU Member State.

The deadline for EU 13th Directive refund claims is 30 June of the year following the calendar year in which the tax was incurred.

Claims must be submitted in English, French or German. The application for refund must be accompanied by the appropriate documentation.

For EU 13th Directive claims, the claim period is one year. The minimum claim amount is EUR250.

Applications for refunds of Luxembourg VAT under the EU 13th Directive must be sent to the following address:

Administration de l’Enregistrement et des Domaines

Bureau d’imposition XI

Remboursements et franchises

67-69, Rue Verte, L-2667 Luxembourg

BP 31

L-2010 Luxembourg

Repayment interest. The Luxembourg VAT authorities do not pay interest on late refunds of VAT made under the EU 13th Directive scheme.

Invoicing

VAT invoices and credit notes. A Luxembourg taxable person must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies to other VAT taxable persons or to nontaxable legal persons. Invoices are not automatically required for retail transactions to private indi­viduals, unless the supply is a distance sale or the customer requests an invoice.

A VAT invoice is required to support a claim for input tax deduc­tion or a refund under the EU Directive 2008/9/EC or EU 13th Directive refund schemes (see the chapter on the EU).

A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply of goods or services. It must be cross-referenced to the original VAT invoice and contain the same information.

Electronic invoicing. Effective 1 January 2013, the VAT law was amended to permit electronic invoicing in line with EU Directive 2010/45/EU.

Proof of exports and intra-Community supplies. Luxembourg VAT is not due on supplies of exported goods or on the intra-Commu­nity supply of goods (see the chapter on the EU). However, to qualify as VAT-free, exports and intra-Community supplies must be supported by evidence proving that the goods have left Luxembourg. Acceptable proof includes the following documen­tation:

  • For an export, a copy of the export document, officially validated by customs, showing the supplier as the exporter. The invoice must include the following language: “Not subject to Luxembourg VAT, article 43, 1, a of the Luxembourg VAT Law — export.”
  • For an intra-Community supply, a range of commercial docu­mentation such as purchase orders, tax invoices, transport docu­mentation, proof of payment and contracts. The invoice must include the following language: “Not subject to Luxembourg VAT, article 43, 1, d of the Luxembourg VAT Law — intra­Community supplies of goods.”

Foreign-currency invoices. If an invoice is issued in a foreign cur­rency, the VAT amount must be converted to euros (EUR) using the official rate in force on the date of the invoice, be published by an approved bank, and be indicated on the invoice.

B2C invoices. Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. For fur­ther details of the VAT rules on electronic services in the EU, please refer to the European Union chapter.

VAT returns and payment

VAT returns. In principle, Luxembourg VAT returns must be filed on a monthly basis. However, the authorities can allow taxable persons whose annual turnover does not exceed EUR112,000 to file only a single annual return for the calendar year. The due date is 1 March of the following year.

Taxable persons whose annual turnover is between EUR112,000 and EUR620,000 may be allowed to submit periodic returns quarterly. In addition, they must file a recapitulative annual return. The due date for the periodic returns is the 15th day of the month following the end of the return period. The due date for the annual return is 1 May of the following year.

Taxable persons whose annual turnover exceeds EUR620,000 must submit periodic returns monthly, plus a recapitulative annual return. The due date for the periodic returns is the 15th day of the month following the end of the return period. The due date for the annual return is 1 May of the following year.

Filing extensions are automatically granted for both the periodic (two months) and the annual returns (eight months). However, these extensions apply exclusively to the filing of the returns. As a result, provisional VAT payments can be requested within the legal deadline.

Return liabilities must be paid in euros.

Electronic filing and archiving. Taxable persons that are required to submit VAT returns monthly or quarterly must file all returns (periodic and annual returns) and EC sales listings electronically, using the tax administration’s electronic portal (eTVA).

In principle, all books, documents and information required by the VAT law should be stored in hard copy. However, electronic storage is allowed, if the data guaranteeing the authenticity of the origin and the integrity of the content are also stored electroni­cally.

Special schemes. Not applicable.

Annual returns. Not applicable.

Penalties

Penalties are assessed for the late payment or late submission of a VAT return in the following amounts:

  • For monthly or quarterly returns, the fine may vary from EUR50 to EUR5,000.
  • For annual returns, the fine may vary from EUR50 to EUR5,000.

EU filings

Intrastat. A Luxembourg taxable person that trades with other EU countries must complete statistical reports, known as Intrastat returns, if the value of its sales or purchases of goods exceeds certain thresholds. Separate reports are required for intra-Com­munity acquisitions (Intrastat Arrivals) and for intra-Community supplies (Intrastat Dispatches). Electronic submissions via email are allowed.

The threshold for Intrastat Arrivals is EUR200,000. The threshold for Intrastat Dispatches is EUR150,000.

Luxembourg taxable persons must complete Intrastat declara­tions in euros.

Intrastat returns are due monthly by the 6th working day of the month following the period (unless they are submitted electroni­cally or on floppy disk, in which case a 10-working-day filing extension is allowed).

A penalty may be imposed for late submission or for missing or inaccurate declarations. The fine is generally EUR500 (although the statistical authorities may impose a penalty of between EUR251 and EUR2,500).

EU Sales Lists. If a Luxembourg VAT taxable person performs intra-Community supplies of goods, it must submit an EU Sales List (ESL) for goods.

In principle, ESLs for goods must be submitted by the 15th day of the month following the end of the month. However, ESLs for goods may be submitted quarterly if the threshold of EUR50,000 of intra-Community supplies of goods to other EU Member States is not exceeded during the concerned quarter or during the four preceding quarters. For a quarterly filing, the ESLs for goods must be submitted by the 15th day of the month following the concerned quarter.

A Luxembourg VAT taxable person must also file an ESL for services rendered. This ESL must provide information regarding services rendered to VAT taxable and nontaxable persons who satisfy the following conditions:

  • They are registered for VAT in another EU Member State, and the services are rendered in the other EU Member State.
  • The services are not exempt from VAT in the EU Member State where they are deemed to take by application of the basic business-to-business (B2B) rule.
  • The recipients are liable to deal with the VAT in the other EU Member State.

ESLs for services must be filed on a monthly basis by the 15th day of each month. VAT taxable persons may file the lists on a quarterly basis by the 15th day of each quarter.

If no transactions reportable in ESLs are performed, no ESLs need to be filed for the concerned month or quarter.

A penalty may be imposed for late, missing or inaccurate ESLs. The penalty may vary from EUR50 to EUR5,000.