When establishing or operating a business in Luxembourg, understanding the Luxembourg VAT (Value Added Tax) is essential. VAT is an indirect tax applied to the sale of goods and services, which businesses collect on behalf of the government. While companies are responsible for charging VAT to their customers, it is ultimately the end consumer who bears the cost, as the VAT is included in the final price. Businesses act as intermediaries in the VAT process, collecting the VAT from their customers and remitting it to the state. However, they can also deduct the VAT paid on their own business expenses, helping to balance the tax burden.
What is VAT in Luxembourg in 2024?
We will start our exploration of the subject by analyzing several key aspects, such as the main regulations and bodies involved, the companies obliged to collect VAT, the different VAT rates in Luxembourg, and some recent changes in the legislation.
Key regulations and governing bodies
In Luxembourg, VAT is governed by a series of laws and regulations designed to align with the broader EU VAT framework. The main laws and directives shaping VAT in Luxembourg include:
- Law of February 12, 1979 concerning value-added tax This is the core law that outlines the rules for VAT, including its application, rates, exemptions, and deductions. Over time, it has been amended to stay in sync with EU VAT directives.
- Passport, valid for at least 3 months after the expiration date of the requested visa. With at least two blank pages.
- EU Directives, particularly Directive 2006/112/CE As a member of the European Union, Luxembourg follows the EU's common VAT system, which establishes uniform rules across member states while allowing flexibility in the setting of VAT rates and other specific provisions.
- Regulations of the Grand Duchy of Luxembourg These regulations clarify the technical and administrative aspects of VAT, such as filing procedures and audit processes. They serve as the practical framework for businesses to follow in their VAT obligations.
- Civil and Penal Procedure Codes Although not specific to VAT, these legal frameworks are crucial in handling disputes, penalties, and legal proceedings related to VAT fraud or non-compliance.
The collection and administration of VAT in Luxembourg are managed by the Administration de l’Enregistrement, des Domaines et de la TVA (AED), which operates independently of the direct tax administration.
Who is required to register for VAT?
In Luxembourg, legal entities engaged in economic activities on a regular and independent basis must register for VAT. If your EU-based company supplies taxable goods or services below a certain threshold, you might be exempt from VAT. This means you won't pay VAT to the tax administration, but you also won't be able to deduct it from your own spendings or indicate VAT on invoices.
So companies often choose to opt for the normal VAT arrangements, in which case you'll pay VAT and can deduct input VAT. But for some it is still a must. Entities required to register for Luxembourg VAT include:
- Businesses established in Luxembourg that begin taxable activities.
- Non-taxable legal entities that engage in intra-community acquisitions of goods exceeding 10,000 euros per year, excluding VAT.
- Businesses not established in Luxembourg but that conduct taxable operations in Luxembourg (except for businesses using the One-Stop-Shop regime).
- Agricultural and forestry businesses that supply wine, crémant, wood, or investment goods exceeding an annual turnover of 35,000 euros, excluding VAT.
An exception is always made for small businesses, those with an annual turnover below 35,000 euros (excluding vat) are exempt from registering for VAT. These businesses do not need to file VAT returns but are required to declare their annual turnover to the authorities.
Luxembourg VAT rates
| Name | Short description | Cost |
| Standard rate | All taxable operations except those included in any of the other categories. | 17% |
| Intermediate rate | Custody and management of securities, printed advertising material, heat not provided by the heating network, and water distribution among others. | 14% |
| Reduced rate | Gas, electricity, floriculture, hairdressing, and more. | 8% |
| Super-reduced rate | Certain medicinal products, books, hotel accommodations, restaurants and non-alcoholic beverages, radio and television broadcasting services, and some others. | 3% |
Luxembourg’s VAT system is continuously evolving, and new changes come into effect regularly to keep up with EU directives and shifts in the global economy.
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Learn moreHow to register for VAT in Luxembourg?
Registering for VAT in Luxembourg is a straightforward process that involves three key steps. Below is a breakdown of these steps.
Step 1. Gather the information
Before starting the registration process, it’s essential to collect all required information to complete the initial declaration or the optional registration form. The details required for VAT registration depend on whether the entity is a business or an individual.
For businesses. Company name, legal structure, address of the registered office, date of incorporation, if applicable, the publication number in the Luxembourg Mémorial C or the Recueil électronique des sociétés et associations (RESA), and the names and addresses of shareholders and directors listed in the company's incorporation documents.
For individuals. Full name, marital status, type and location of the economic activity, and personal contact information.
- Bank account details, IBAN and BIC code of a Luxembourgish or foreign bank.
- Start date of the economic activity, which determines when the first VAT return will be due.
- Details on intra-community acquisitions or supplies of goods or services will be made.
- Turnover, an estimated annual turnover excluding VAT.
Companies also should add to the documents package a copy of the articles of incorporation in French or German and a copy of the identity document of the partners mentioned in the articles of incorporation and the company directors. While natural persons must attach a copy of the identity card of the concerned entrepreneur.
It’s also important to understand that additional information may be requested depending on the specificity of the business. The list we indicate is non-exhaustive.Test
Step 2. Submit the forms to the Tax Office
Once you have collected all the necessary information, the next step is to complete the relevant forms and submit them to the appropriate tax authority. The form to be completed will depend on whether the VAT registration is mandatory or voluntary, the nature of the applicant and whether the applicant makes intra-community acquisitions (AIC) of over 10,000 euros per year.
Mandatory registration
It is necessary to submit an initial declaration for natural persons or one for legal entities depending on the nature of the applicant.
If the business is exempt from VAT but makes intra-community acquisitions (ICA) exceeding 10,000 euros annually, an Initial Declaration (ICA) for individuals or legal entities must be submitted.
Voluntary registration
If the registration is voluntary, it is necessary to submit either a declaration of option (ICA) for natural persons or one for legal entities depending on the nature of the applicant.
These forms can be submitted either online via MyGuichet.lu, the government’s secure digital platform, or by mail to the Registration Duties, Estates and VAT Authority (AED).
Registration Duties, Estates and VAT Authority (AED)
- Address: 308 Rte d'Esch, Cessange Luxembourg
- Phone: (+352) 24 78 06 24
- Mail: info@aed.public.lu
- Website: pfi.public.lu
- Working hours: Monday to Friday from 8.30 to 12.00 and from 14.00 to 16.00
LINKS: The available forms include:
- Initial declaration natural persons
- Initial declaration legal persons
- Initial declaration (ICA) natural persons
- Initial declaration (ICA) legal persons
- Declaration of option (ICA) natural persons
- Declaration of option (ICA) legal persons
Step 3. Receive the VAT registration number
Once the submission is processed and approved, the business or individual will be issued a Luxembourg VAT number. This number consists of eight digits, preceded by the country code "LU." The VAT number is essential for all VAT-related transactions, such as invoicing and filing VAT returns.
IOSS in Luxembourg
Even if a business is not required to complete a standard VAT registration, it may still need to register for IOSS depending on its activities. Businesses selling to EU consumers from outside the EU can register for IOSS in one EU country. They can pay VAT for all their EU sales through one online portal.
This is a VAT system for selling goods and electronic services in the EU, including Luxembourg. The IOSS was introduced on 1 July 2021 as part of the EU's VAT reform. It makes it easier for consumers in the EU to pay VAT on imported goods. This system makes it easier for businesses and tax authorities to collect VAT on cross-border e-commerce.
Who needs to register for IOSS?
- E-commerce sellers. Any business or marketplace that conducts distance sales of goods to consumers in the EU. This applies to goods shipped from outside the EU with a value of up to 150 euros (excluding excise goods like alcohol or tobacco).
- Marketplaces. Online platforms that facilitate sales to EU consumers may also register for IOSS to handle VAT on behalf of sellers using their platform.
How does IOSS work and how to register
Businesses selling goods to European consumers outside the EU can register for IOSS in an EU Member State, such as Luxembourg. This allows them to declare and pay VAT for all their distance sales in the EU through a single online portal.
Once registered, businesses must charge VAT at the time of sale and pay it to the Member State in which they are registered, which in this case would be Luxembourg. Luxembourg then distributes the VAT to the EU countries to which the goods are delivered.
The VAT rate depends on where in the EU the goods are going. IOSS has many advantages for businesses and consumers. EU shoppers pay VAT on top of the final price. This makes shopping easier and deliveries faster.
Businesses can register for IOSS in any EU member state. To register in Luxembourg, companies must submit an online application through the Registration Duties, Estates, and VAT Authority’s dedicated page.
Understanding Luxembourg VAT legislation is important for businesses operating in the region. Regardless of if you are starting a new business or running an established company, you need to be aware of the VAT registration requirements for your business activities, as well as the applicable VAT procedures and rates, in order to comply with the regulations.
There are always specific details and unique cases that may require further investigation. To ensure full compliance with Luxembourg VAT obligations, it is recommended to consult official government resources or seek advice from tax professionals. This will provide clarity on any specific requirements and help you confidently navigate the VAT landscape in Luxembourg.
