Key takeaways
- Luxembourg’s VAT system consists of standard and reduced rates, exemptions, and zero-rated goods.
- Businesses must register for a VAT number in Luxembourg within two weeks of commencing taxable activity to remain compliant with local tax authorities.
- The government implemented temporary adjustments to its VAT rates due to the COVID-19 pandemic.
In short: The standard Luxembourg VAT rate is 17%, the lowest in the EU. Reduced rates of 14%, 8% and 3% apply to specific goods and services. Businesses with annual turnover above €50,000 must register for Luxembourg VAT, file returns electronically through the eCDF system, and meet invoicing and Intrastat rules.
Luxembourg is a small but economically significant EU member. Its VAT system is detailed and plays a vital role in its thriving economy.
This guide explains VAT in Luxembourg: the rates, registration and compliance requirements. It focuses on ecommerce businesses and also covers the impact of the COVID-19 pandemic.
What are the VAT rates in Luxembourg?
Luxembourg has a standard VAT rate, reduced VAT rates, exemptions and zero-rated goods. Luxembourg follows EU VAT directives, which form the basis of its VAT system. You can also read VAT in Hungary - VAT Rates and Compliance Requirements.
These rates and rules cater to the diverse needs of Luxembourg’s trade and service sectors. If your business operates in the Grand Duchy, you need to know them. This helps you run smoothly and stay fully compliant with Luxembourg tax authorities.
What is the standard VAT rate in Luxembourg?
The standard Luxembourg VAT rate is 17%, the lowest in the EU. It applies to most taxable goods and services.
The standard rate is reviewed and adjusted from time to time. The most recent change took effect on January 1, 2024, when the rate returned to 17% after a temporary cut to 16% in 2023.
The 17% rate applies to goods and services across many sectors. Companies must report their VAT information through a user account on the relevant government portal.
What are the reduced VAT rates in Luxembourg?
Luxembourg also has reduced VAT rates of 14%, 8% and 3% for specific goods and services:
Reduced rate (1): 14% - Applied to certain goods and services, including wine, advertising services, and non-alcoholic beverages.
Reduced Rate (2): 8% - Applied to a range of goods and services. These include gas and electricity, cleaning in private households, and hairdressing. They also include minor repairs of bicycles, shoes and leather goods, clothing and household linen (e.g. mending and alteration), etc.
Super-reduced rate: 3% - Applied to essential goods and services. These include foodstuffs, pharmaceutical products, books, newspapers and periodicals, children's clothing, hotels, restaurants, and admission to cultural events.
Which goods and services are exempt or zero-rated?
Besides standard and reduced rates, the Luxembourg VAT system also has zero-rated goods and exemptions.
Intra-community supplies and international transport are zero-rated. Financial services, health and medical care services, and education services are just a few of the areas exempt from VAT.
Zero-rated goods and services are technically subject to VAT, but at a rate of 0%. This means businesses selling them can reclaim VAT on their costs. That is not possible for VAT-exempt sales.
How do VAT registration and compliance work in Luxembourg?
To comply with Luxembourg VAT, you need to register when required, file and pay on time, and submit and keep records electronically. This section covers the process of Luxembourg VAT registration, when you need to register, and the filing and payment deadlines.
Understanding these rules, plus the electronic submission and recordkeeping processes, will help your business stay compliant with Luxembourg’s tax authorities.
When do you need to register for VAT in Luxembourg?
You must register for VAT in Luxembourg if you set up certain activities in the country or exceed specific thresholds. The VAT exemption threshold in Luxembourg is €50,000. Businesses with annual turnover above this amount must register for VAT. For a closer look, see Understanding Denmark VAT Rates and Compliance.
You must register within two weeks of starting the taxable activity, although there are a few exemptions to this rule.
Ecommerce businesses must also register for a VAT number if their annual cross-border sales in Luxembourg exceed €10,000. The process of VAT registration involves:
- Contacting the Luxembourg tax authorities.
- Completing the registration within 15 days of starting the taxable activity.
- Upon registration, the business will receive a VAT identification number.
What are the VAT filing and payment deadlines in Luxembourg?
Luxembourg VAT deadlines depend on your filing period, which may be monthly, quarterly or annual based on certain conditions. The annual VAT return in Luxembourg is due before March 1st of the following year.
Taxpayers who file monthly or quarterly returns must submit their annual Luxembourg VAT return by the 15th of the month after the reporting period. Payment due dates are the same as the filing dates.
Meeting these deadlines is crucial to avoid penalties and stay compliant with Luxembourg tax authorities. Late VAT returns and payments can lead to fines or other consequences for your business.
How do electronic submission and recordkeeping work?
Businesses in Luxembourg must submit VAT returns electronically through the eCDF system. Electronic submission makes reporting and paying Luxembourg VAT simpler. It also helps businesses keep accurate, up-to-date records of their VAT transactions.
Businesses must also meet electronic recordkeeping rules for VAT documents, annual accounts and company accounts in Luxembourg. These rules require the use of the platform for the electronic gathering of financial data (eCDF). Documents must be kept for 5 or 10 years, depending on the case. For a real-world example, read our Amer Sports case study.
Failing to file VAT returns electronically or to follow recordkeeping rules can lead to penalties. These range from €250 to €10,000 per infringement, depending on how serious the violation is.
What special VAT provisions apply to ecommerce businesses?
Ecommerce businesses can use the One-Stop-Shop (OSS) and Import One-Stop-Shop (IOSS) systems. These simplify VAT registration and compliance, making it easier to operate across multiple EU countries.
One-Stop-Shop (OSS) system
The OSS scheme lets ecommerce sellers register for VAT in a single EU Member State for all their intra-EU sales. They then report and pay VAT through the OSS system. They don't need to register for VAT in each EU country where they have customers. Read more in our guide: Finnish VAT Rates and VAT Compliance.
As a result, the OSS system simplifies VAT compliance for ecommerce businesses selling in multiple EU countries.
By registering for OSS in the country where your business is located, you get the following benefits:
- Streamlined VAT compliance
- A single electronic quarterly return
- Conformity with EU VAT regulations
- Access to a broader market
- Effective tax administration
Import One-Stop-Shop (IOSS) system
The IOSS system in Luxembourg simplifies VAT on distance sales of imported goods. It covers goods worth up to €150 imported from outside the EU to customers in Luxembourg.
With IOSS, businesses declare and pay VAT at the time of sale. This makes reporting and payment easier for ecommerce businesses.
You can register for IOSS through the IOSS portal of any member state. Non-EU companies selling goods worth €150 or less to non-VAT registered customers in the EU can register for the IOSS.
Using the IOSS system offers ecommerce businesses in Luxembourg:
- Streamlined VAT compliance
- Unified registration and reporting system
- Improved efficiency
- Transparent pricing for customers
How does Intrastat reporting work in Luxembourg?
Businesses in Luxembourg that trade goods with other EU states must file Intrastat reports once they pass set thresholds. Intrastat reporting covers trade in goods between EU Member States and is an integral part of doing business in the EU.
These businesses must follow Intrastat reporting rules and processes. This ensures accurate data collection and compliance with EU trade rules.
What are the Intrastat thresholds in Luxembourg?
In Luxembourg, the current Intrastat thresholds are €250,000 for arrivals and €200,000 for dispatches. These thresholds decide when a business must submit an Intrastat declaration and account for acquisition tax on goods traded between EU Member States.
Businesses that exceed these Intrastat thresholds must submit Intrastat declarations. They must also account for acquisition tax on the goods traded between EU Member States.
How do you submit an Intrastat declaration?
In Luxembourg, you submit Intrastat declarations to the Intrastat Department of STATEC. This department is part of the National Institute for Statistics and Economic Studies (Institut national de la statistique et des études économiques).
You can submit declarations on paper or electronically. Paper forms are available on the Intrastat Department’s website. Electronic declarations go through the designated platform. The declaration must include relevant details about the movement of goods.
The Intrastat deadline in Luxembourg is the 16th day of the month after the reporting period. Submit your declarations on time to avoid fines or other penalties. Late Intrastat declarations can lead to fines between EUR 100 and EUR 10,000 per infringement.
Do you need a fiscal representative in Luxembourg?
Non-EU companies must appoint a fiscal representative in many EU countries, including Luxembourg. This ensures the company complies with local VAT rules.
The fiscal representative is jointly and severally liable for the foreign company's VAT debts. This gives tax authorities extra assurance that the VAT will be correctly accounted for and paid.
To appoint a fiscal representative in Luxembourg, you choose a duly approved tax representative. They manage all the registration activities and formalities for Luxembourg VAT declarations.
The tax representative acts for the company for VAT purposes in Luxembourg. They ensure compliance with all VAT obligations and are the main point of contact for the local tax office.
What must a Luxembourg VAT invoice include?
A VAT invoice in Luxembourg must meet various requirements set by the Luxembourg tax authorities. The main components of a Luxembourg VAT invoice are:
- Invoice number: A unique and sequential number identifying the invoice.
- Date of issue: The date when the invoice was issued.
- VAT number: The seller's VAT identification number.
- Full name and address: The full names and addresses of the seller and the buyer.
- Description of goods or services: A detailed description of the goods or services supplied.
- Quantity of goods or services: The quantity of the goods or services provided.
- Unit price: The price per unit of the goods or services, excluding VAT.
- Total net amount: The total amount excluding VAT.
- VAT rate: The applicable VAT rate(s).
- VAT amount: The total amount of VAT charged.
- Total gross amount: The total invoice amount, including VAT.
- Date of supply: If different from the date of the invoice, the date when the goods were delivered or the services were completed.
- Any additional information: Any additional information that might be required, such as customs details for international shipments.
How did COVID-19 affect Luxembourg VAT rates?
Luxembourg made temporary changes to its VAT rates to support businesses during a period of economic strain. Like countries worldwide, Luxembourg felt a significant economic impact from the global COVID-19 pandemic.
One notable change was a temporary cut in the standard VAT rate from 17% to 16% for 2023. The standard rate returned to 17% on January 1, 2024.
Conclusion
To navigate Luxembourg VAT, you need a thorough understanding of the rates, registration process and compliance obligations. Stay informed and careful in all areas of VAT compliance, and your VAT experience in Luxembourg will run smoothly.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
How Taxually handles this
Taxually’s CrossTax handles VAT registration, VAT, OSS and IOSS returns and fiscal representation in the countries you sell into, and checks your sales data against 250+ validation rules before each filing. OneTax then pays every tax authority with one bulk payment in your chosen currency.
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Frequently asked questions
What is the VAT rate in Luxembourg 2023?
In 2023, the standard VAT rate in Luxembourg was temporarily 16%, reduced from the usual 17%. The reduced rates in 2023 were 13%, 7%, and 3%. Since January 1, 2024, the rates are back at 17% (standard) and 14%, 8% and 3% (reduced).
Are there any reduced VAT rates in Luxembourg?
Yes, Luxembourg has reduced VAT rates of 3%, 8%, and 14% for certain goods and services.
How does a business register for VAT in Luxembourg?
Businesses can register for VAT in Luxembourg by submitting an application to the Luxembourg Inland Revenue (Administration de l'Enregistrement et des Domaines). The application should include all necessary documentation, such as business identification details, proof of taxable activity, and any other required information.
How do I check if a company is registered in Luxembourg?
To check if a company is registered in Luxembourg, you can access the Luxembourg Trade and Companies Register (Registre de commerce et des sociétés – RCS) which is available for free. The information regarding traders and companies which must be disclosed by law will be published alongside their RCS number.
