Luxembourg City GMT +1
EY
35E, Avenue John F. Kennedy L-1855 Luxembourg Luxembourg
Indirect tax contact
Yannick Zeippen +352 42-124-7362 yannick.zeippen@lu.ey.com
Jacques Verschaffel +352 41-124-7219 jacques.verschaffel@lu.ey.com
Olivier Lambert +352 41-124-7361 olivier.lambert@lu.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Taxe sur la valeur ajoutée (TVA)
Date introduced 5 August 1969
Trading bloc European Union (EU)
Administered by Ministry of Finance (http://www.aed.public.lu)
VAT rates
Standard 17% Reduced 3%, 8%, 14%
Other Exempt-with-credit and exempt-without-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
Established None
Non-established None
Distance selling None
Intra-Community acquisitions EUR10,000
Electronically supplied services
None
Recovery of VAT by non-established businesses Yes
B. 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 European Union (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
Quick Fixes. Pending introduction of a “definitive” system for the VAT treatment of intra-Com munity supplies of goods to taxable persons, the EU has adopted Quick Fixes for intra-Community trade in goods. For an overview of the Quick Fixes rules, see the chapter on the EU.
In Luxembourg, the Quick Fixes are applicable as of 1 January 2020, and an overview of the changes are below:
• Call-off stock – Luxembourg implemented the respective EU law without any local changes.
• Chain transactions – Luxembourg followed the approach of the respective Quick Fix already in the past; no practical change has been made in this respect.
• Proof of cross-border transactions – No specific legal provision has been implemented, as the Implementing Regulation is also directly applicable in Luxembourg.
• Valid customer VAT ID – VAT exemption related to intra-Community supply of goods cannot be applied if the respective EU Sales listings are missing or not completed properly (whether the mistake is connected to the EU VAT ID of the customer or to other numerical or timing difference).
Effective use and enjoyment. To avoid instances of nontaxation or double taxation, EU Member States can apply use and enjoyment rules that allow a service that is “used and enjoyed” in the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed.
If a service is taxed in the EU under the use and enjoyment provisions, a non-EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU.
In Luxembourg, the following services are subject to the “use and enjoyment” provisions:
• Broadcasting services and telecommunication services, if the place of taxation would be Luxembourg but the use and enjoyment is outside the EU.
• Transport of goods, if the place of taxation would be Luxembourg but the use and enjoyment is outside the EU. This would not apply in the opposite direction, if transport on behalf of a non-EU customer but transport taking solely place in Luxembourg. Such a supply is deemed to take place where the recipient is established, even if the transport is solely taking place in Luxembourg.
Transfer of a going concern. The transfer of a totality of assets or part thereof does not qualify as a transaction falling within the scope of VAT. To qualify as such, the assets should be located in Luxembourg, should allow the transferee to continue the business independently, and both the transferor and the transferee should be registered for Luxembourg VAT.
C. Who is liable
A taxable person is any business entity or individual that carries out economic activities indepen dently and regularly. Economic activities include activities such as supplies of goods or services, intra-Community acquisitions (see the chapter on the EU) in the course of a business.
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 tax able 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 nontax able 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.
For the supply of distance sales of goods, there is no threshold. The supplier is liable for the VAT due in the country of arrival. The supplier can use the One-Stop Shop (OSS) to report the VAT due via one central registration. However, as a derogation to this rule, when the supplier is estab lished in one single Member State different from the country of arrival and the value of the goods does not exceed the threshold of EUR10,000 of distance sales, the supplier can choose for taxation in its Member State of establishment.
Exemption from registration. The VAT law in Luxembourg does not contain any provision for exemption from registration.
Voluntary registration and small businesses. Taxable persons established in Luxembourg, whose annual turnover does not exceed EUR30,000 are in principle not subject to the normal VAT rules and only have to notify the authorities their beginning of activity and inform the authorities of their turnover realized on an annual basis. However, they can opt to be subject to the normal VAT rules.
The VAT law in Luxembourg does not contain any other provisions for voluntary VAT registration.
Group registration. VAT grouping is permitted under Luxembourg VAT law if Luxembourg entities are closely bound to one another by financial, economic and organizational links. An entity can only be member of one VAT group. The constitution of a VAT group is optional but if a VAT group is constituted, all companies that fulfill the legal conditions to be a member, should opt to be a member of the VAT group.
The minimum time period required for the duration of a VAT group is two calendar years.
The group members are jointly and severally liable for VAT debts, interest and penalties.
Holding companies. In Luxembourg, a pure holding company can be a member of a VAT group, if it is bound by the other entities by financial, economic and organizational links. In principle, the fact that a member of a VAT group is a pure holding should not have an impact on the right to deduct input tax by the group. However, VAT on costs directly related to the holding activity should still not be recoverable.
Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC Article 132(1)(f) has been implemented in Luxembourg. This provides an option to exempt support services that the cost-sharing group supplies to its members, providing certain conditions are met (in accordance with specific requirements laid out in Luxembourg VAT law).
Fixed establishment. There is no legal definition of fixed establishment and there are no admin istrative guidelines how to interpret the term “fixed establishment” in Luxembourg. The tax authorities must apply the rules fixed by the Council Implementing Regulation 282/2011.
Non-established businesses. A “non-established business” is a business that has no fixed estab lishment 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 sup plies 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
Alternatively, the application can be done electronically.
Reverse charge. The basic rule is that the supplier of services or goods, which are subject to Luxembourg VAT, is liable to charge VAT to its customers and should therefore register for Luxembourg VAT. Hence for local supplies, the supplier should charge VAT to its customers, even if they are a non-established business. By exception to the basic rule, the Luxembourg VATtaxable recipient of services falling under the basic rule of place of taxation of services (busi ness-to-business (B2B)) is liable for the VAT and should apply the reverse charge if the supplier is not established in Luxembourg.
Domestic reverse charge. A domestic reverse charge applies in Luxembourg for the transfer of allowances to emit greenhouse gases.
Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States, with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice these are mostly private individuals), but we refer to these rules as e-commerce VAT rules because most of these transactions are conducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see Section B, Effective use and enjoyment subsection above). Therefore:
• For supplies of services made by a nonresident supplier to a business customer (B2B), the busi ness customer is responsible for accounting for the VAT due, using the reverse charge.
• For supplies of goods made by a nonresident supplier to a business customer (B2B), where the goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due, as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.
• For supplies of goods or services made by a nonresident supplier to a final consumer (B2C), the supplier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling threshold of EUR10,000, with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a “One-Stop-Shop” mechanism.
For more details about intra-EU distance sales, see the chapter on the EU.
Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.
Local VAT registration. A nonresident supplier may choose to register for VAT in each Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). Non-EU businesses may be required to appoint a fiscal representative for accounting for the VAT due on these transactions.
In Luxembourg non-EU businesses are required to provide a guarantee in favor of the State for their potential VAT debts. No other special rules apply.
One-Stop Shop. Effective 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop-Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic, telecommunication and broadcasting services.
The OSS is an electronic portal that allows businesses to:
• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return
The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies of goods, as well as services that fall under the OSS.
In Luxembourg there are no additional special rules.
For more details about the operation of the OSS, see the chapter on the EU.
Import One-Stop Shop. Effective 1 July 2021, the Import One-Stop-Shop (IOSS) scheme applies for B2C distance sales of goods from outside the EU.
Effective 1 July 2021, VAT is due on all commercial goods imported into the EU, regardless of their value. The actual supply is subject to VAT in the country where the goods are imported (the country of destination). The IOSS facilitates the declaration and payment of VAT due on the sale of low-value goods (i.e., consignments valued at less than EUR150 per consignment). It allows suppliers selling low-value goods dispatched or transported from a non-EU country to customers in the EU to collect, declare and pay the VAT due. If the IOSS is used, the importation into the EU is exempt from VAT.
In Luxembourg there are no additional special rules.
For more details about the IOSS, see the chapter on the EU.
The use of the IOSS special scheme is not mandatory. If VAT is not collected via the IOSS scheme, the importation of goods into the EU is subject to import VAT in the country of final destination, and the Member State can decide freely who is liable to pay the import VAT, which could be the customer or the seller (or an electronic interface).
In Luxembourg the importer of records is liable to deal with the Luxembourg VAT due if Luxembourg is the country of importation (or the interface is liable to do so if the interface facilitates the distance sales).
Postal Services and Couriers Scheme. If the IOSS is not used and the customer is liable for the import VAT due on the supply (and importation) of consignments with a small intrinsic value (i.e., less than EUR150), the VAT can be collected using the special scheme for postal services and couriers.
In Luxembourg there are no additional special rules.
For more details about the special scheme for postal services and couriers, see the chapter on the EU.
Online marketplaces and platforms. Under the new EU VAT e-commerce rules, effective 1 July 2021 taxable persons that “facilitate” certain B2C sales of goods are deemed to have purchased and then supplied those goods themselves. This means that the single supply from the “underlying” supplier to the final consumer is split into two deemed supplies:
• A supply from the supplier to the facilitator (deemed B2B supply)
• A supply from the facilitator to the final customer (deemed B2C supply). Any intermediation service provided by the facilitator is disregarded for VAT purposes
This provision does not cover all sales facilitated via the facilitator. It only covers distance sales of goods imported from non-EU jurisdictions in consignments with an intrinsic value not exceeding EUR150. The jurisdiction of residence of the supplier using the facilitator is irrelevant. The supply to the facilitating platform is VAT exempt and the supplies made by that platform follow the e-commerce VAT rules as described above. In addition, the provision also covers sales within the EU, if the supplier is not established within the EU. This applies to both local shipments within one Member State, as well as intra-Community shipments. In both cases, the final customer must be a nontaxable person.
In Luxembourg there are no additional special rules.
For more details about the rules for online marketplaces, see the chapter on the EU.
Vouchers. The VAT treatment of vouchers depends on whether they qualify as a “single-purpose” voucher (SPV) or a “multipurpose” voucher (MPV).
An SPV is a voucher where the place of supply of the goods or services to which the voucher relates and the VAT due on the supply is known at the time of the voucher’s issue. Each transfer of an SPV qualifies as a supply of goods or services.
An MPV is any voucher other than an SPV. VAT will be due at the time the MPV is used.
Registration procedures. The application file to register for VAT should be submitted with the tax authorities at the latest within 15 days after the start of the economic activity of the taxable per son. The application file can be sent to the tax authorities in hard copy or electronically through the website of the tax authorities.
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.
Deregistration. If a 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 stop ping the activity.
Changes to VAT registration details. On the application document to register for VAT, some infor mation should obligatory be indicated, such as the name of the company, its address and its legal form. A VAT-taxable person must inform the authorities if there are changes with regard to this information. This can be done by email or postal mail and should be sent to the competent VAT office of the company.
In case a company changes its legal form (for instance from a SA to a Sarl) it should deregister for VAT and apply for a new VAT number under its new legal form. There is no possibility to “recycle” a VAT number.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to VAT.
The VAT rates are:
• Standard rate: 17%
• Reduced rates: 3%, 8%, 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 3%
• Food for human consumption, excluding alcohol
• Agricultural products
• Books, newspapers and periodicals
• 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 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 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 are not liable to VAT and that do not qualify for input tax deduction. However, in Luxembourg some supplies are clas sified 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 intra-Community supplies of goods (see the chapter on the EU).
Examples of exempt supplies of goods and services (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. Luxembourg operates an option to tax in respect of supplies and rent of real estate to the extent the purchaser or lessee will use the real estate predominantly for purposes that entitle the right to deduct input tax. There are no other options to treat exempt supplies as taxable.
E. 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).
Deposits and 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.
Continuous supplies of services. In case the customer is liable to self-assess VAT and no state ments of account are issued and no payments are made, the VAT becomes due at the end of the calendar year.
Goods sent on approval for sale or return. There are no special time of supply rules in Luxembourg for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above). The time of supply (when the VAT becomes due) is when the supply takes place.
In case the sale of the goods only takes place when the customer approves the sale, then the sup ply will take place at the time of the approval by the customer.
If the goods are not approved and are returned to the supplier, no supply will take place and there should be no VAT consequences related to the return of the goods.
If the goods are not approved, but are not returned to the supplier, the VAT consequences would depend on what the supplier will do with these goods. Where the goods stay in Luxembourg and are stored in a warehouse, then the supplier will have to perform an assimilated intra-Communi ty acquisition of the goods and have to register for VAT. Where the goods are not stored and sold in Luxembourg (but, for example, destroyed), then no VAT consequences should occur.
Reverse-charge services. For supplies of services subject to VAT in the recipient country, the chargeable event occurs when the supply is completed.
Leased assets. There are no special time of supply rules in Luxembourg for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
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.
Intra-Community acquisitions. The time of supply for an intra-Community acquisition of goods is the 15th day of the month following the month in which the acquisition takes place. If the sup plier 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.
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.
Distance sales. The time of supply for supplies of distance sales is when the goods are delivered and the power of disposal is thus transferred.
F. 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, VAT paid on intra-Community acquisitions of goods and VAT self-assessed on reverse-charge services (see the chapter on the EU)
A valid tax invoice or customs document must generally accompany a claim for input tax.
Taxable persons should be entitled to claim back input tax by reporting it as deductible VAT in their VAT returns within the statute of limitation (which is five years after the end of the year during which the VAT has become due). However, as the recovery of the VAT is conditioned by the existence of a direct and immediate link between the costs incurred and the related income generated and the taxable person must be able to document such link, it is recommended to report the deductible VAT in the period during which the VAT has become due and a valid invoice was available.
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. If a Luxembourg taxable person performs both exempt and taxable supplies, it may only recover a portion of input tax. This situation is referred to as “partial exemption.” The taxable person calculates its right to recover input tax itself. Approval from the tax authorities is not required to use the partial exemption standard method in Luxembourg.
The tax authorities will, however, review the calculation when performing a VAT audit/assessing the annual VAT returns.
The amount of input tax that may be recovered is calculated in the following two stages:
• The first stage identifies the input tax that may be directly allocated either to exempt or to tax able supplies. Exempt-with-credit supplies are treated as taxable supplies for these purposes. Input tax directly allocated to exempt supplies is not deductible. Input tax directly allocated to taxable supplies is fully recoverable.
• The second stage prorates the input tax on mixed expenditures (relating to both taxable and exempt supplies) in order to allocate a portion to taxable supplies (which may be recovered). This treatment applies to the input tax on general business overhead expenses.
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 mak ing 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. If wished by the taxable person, it does not have to request an approval from the tax authorities to use this special method, but the tax authorities will review the calculation when performing a VAT audit/assessing the annual VAT returns.
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. It also includes services that have similar characteristics as capital goods (for example, the purchase of tailormade software).
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 5 years
For movable goods, the adjustment period starts 1 January of the year in which the goods are manu factured 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 tax, 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 acquisi tion 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 tax, 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.
Pre-registration costs. Input tax incurred on pre-registration costs in Luxembourg is not recover able.
Bad debts. If it can be reasonably expected that the customer will not pay (or not pay the full amount), the taxable person is entitled to reclaim the VAT on the unpaid VAT amount. There are no specific rules to determine as from when it can be reasonably expected that the customer will not pay. A regularization should be done if after the reclaim of VAT, the customer would make a payment.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Luxembourg.
G. Recovery of VAT by non-established businesses
The Luxembourg VAT authority refunds VAT incurred by businesses that are neither established nor registered for VAT in Luxembourg. Non-established businesses may claim Luxembourg VAT to the same extent as VAT-registered business.
EU businesses. For businesses established in the EU, refunds are made under the terms of EU Directive 2008/9/EC. The VAT refund procedure under the EU Directive 2008/9 may be used only if the business did not perform any taxable supplies in Luxembourg during the refund period (excluding supplies covered by the reverse charge). For full details see the chapter on the EU.
Please find below specific rules for Luxembourg:
• 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.
Non-EU businesses. For businesses established outside the EU, refunds are made under the terms of the EU 13th Directive.
Luxembourg does not exclude any non-EU country from the refund scheme (no reciprocity required).
Please find below specific rules for Luxembourg:
• The deadline 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.
• The claim period is one year.
• The minimum claim amount is EUR250; there is no maximum amount.
• 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
• The Luxembourg VAT authorities do not pay interest on late refunds of VAT made under the EU 13th Directive scheme.
Late payment interest. The Luxembourg VAT authorities do not pay interest on late refunds of VAT made by non-EU businesses.
In case of late VAT refund payments to EU businesses, according to the Directive n° 2008/9/EC implemented in the Luxembourg VAT law, Luxembourg must pay late payment interest at a rate of 7.2% per year from the date on which the refund should have been made.
H. Invoicing
VAT invoices. A Luxembourg taxable person must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies to other 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).
Credit notes. 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. Luxembourg VAT law permits electronic invoicing in line with EU Directive 2010/45/EU (see the chapter on the EU).
Simplified VAT invoices. Simplified VAT invoices are allowed in Luxembourg. Simplified VAT invoices are only allowed if the amount of the invoice, VAT included, does not exceed EUR100. There are some exceptions to this rule, where the issuance of simplified invoices is not allowed, for instance in case of self-billing.
Self-billing. Self-billing is allowed in Luxembourg. It is by the acquiror or recipient of a supply of goods or services is allowed, only where there is agreement between both parties and each invoice is subject to an acceptance procedure by the supplier.
Proof of exports and intra-Community supplies. Luxembourg VAT is not due on supplies of export ed 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 sup plier 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. No specific document as such is required or indispensable. However, if a supplier is in possession of the documents intro duced by the Quick Fixes, the authorities must accept the proof of the transport (see the subsection above Quick Fixes). The invoice must include the following language: “Not subject to Luxembourg VAT, article 43, 1, d of the Luxembourg VAT Law – intra-Community supplies of goods.”
Foreign currency invoices. If an invoice is issued in a foreign currency, the VAT amount must be converted to the domestic currency, which is the euro (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.
Supplies to nontaxable persons. Except in case of distance sales of goods and the supply of new means of transports, no invoice should be issued to private individuals who do not qualify as VAT-taxable persons.
Transactions between related parties. By derogation to the normal rules, the VAT taxable basis of transactions between related parties supplying goods or services is the open market value, if the remuneration is lower than the normal value and the recipient has no full right to recover input tax. If the remuneration is lower than the open market value, the supplier has no full right to recover input tax, the supply is exempt from VAT or if the remuneration is higher than the open market value and the supplier has no full right to recover input tax.
Records. Examples of records that must be held for VAT purposes in Luxembourg include gen eral ledger, trial balances, purchase and sales invoices, register of consignment stock, transport documents and agreements.
Record retention period. All books (e.g., general ledger and trial balances), documents and infor mation required by the VAT law (e.g., purchase and sales invoices, register of consignment stock, transport documents, agreements) should be stored for 10 years from the date of the issuance (in case of invoices issued or received) and from the date of closing (in case of accounts) or their date (in case of other documents).
Electronic archiving. In principle, all books, documents and information required by the VAT law should be stored by a Luxembourg taxable person in hard copy in Luxembourg. However, elec tronic storage is allowed, if the data guaranteeing the authenticity of the origin and the integrity of the content are also stored electronically. In the latter case, the Luxembourg taxable person should inform the authorities of the place of storage when filing its annual VAT return.
I. Returns and payment
Periodic 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 with annual turnover 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 with annual turnover that 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.
A Luxembourg taxable person, who only performs transactions, which do not entitle the right to recover input tax should not register for VAT, except if it would be liable to self-assess Luxembourg VAT on services received from non-Luxembourg suppliers or perform intra-Community acquisi tions of goods transported from other EU Member States into Luxembourg. In case a company should be registered for VAT, it is in principle liable only to file annual returns. The due date of filing these returns is 1 March (with an automatic extension of eight months).
Periodic payments. Luxembourg VAT-payable amounts, resulting from periodic VAT returns, should be paid by the 15th of the following month. If the annual returns result in an (additional) VAT-payable amount, it should be paid by 1 March of the following year in case of single or simplified VAT return, or by 1 May of the following year in case of recapitulative VAT return. When making a payment to the bank account of the tax authorities, a reference should be made wherein the tax number of the VAT taxable person (so-called Matricule number, which is different than the VAT number) and the return concerned is included. Payments must be made by bank transfer and by using the correct reference.
Electronic filing. Electronic filing is mandatory in Luxembourg for all taxable persons. Taxable persons that are required to submit VAT returns monthly or quarterly must file all returns (peri odic and annual returns) and EC sales listings electronically, using the tax administration’s elec tronic portal (eTVA).
Payments on account. Payments on account are not required in Luxembourg.
Special schemes. Cash accounting. Businesses with an annual taxable turnover (excluding VAT) of less than EUR500,000 are eligible to use the cash accounting scheme that allows VAT to be accounted for on the basis of cash or other consideration paid and received. However, if their annual taxable turnover (excluding VAT) subsequently exceeds EUR500,000, they must stop using the scheme.
Travel agencies. A special VAT scheme is applicable to transactions carried out by travel agents, who deal with customers in their own name and who use supplies of goods or services provided for the direct profit of the customers by other VAT taxable persons in the provision of travel facilities. The place of taxation of their services is deemed to be where the travel agent is estab lished. The VAT-taxable basis of the services rendered by the travel agency is the margin realized, decreased with the VAT due on the margin. A travel agent has no right to deduct input tax, which has been invoiced on the supplies of goods and services rendered for the direct benefit of the customers by the other VAT-taxable persons.
Margin scheme on secondhand goods and artwork. Under certain conditions, a special VAT scheme is applicable on the supplies of secondhand goods and artwork. If this scheme is applicable, the VAT taxable basis of the supply of goods by a re-seller is the margin realized, decreased with the VAT due on the margin. The margin is the difference between the sales price requested by the re-seller and its purchase price.
Investment gold. The supply, intra-Community acquisition and import of investment gold is exempt from VAT. However, producers of investment gold or transformers of gold can opt to tax their supply to VAT.
Annual returns. Annual returns are required in Luxembourg in addition to periodic returns. However, the authorities can allow taxable persons whose annual turnover does not exceed a certain amount (see the subsection Periodic returns above) to file only a single annual return for the calendar year. In principle, the annual returns should be the sum of the periodic returns. However, if adjustments or regularizations should be done (e.g., when calculating the definitive deductible prorate), it should occur in the annual returns.
Supplementary filings. Intrastat. A Luxembourg taxable person that trades with other EU coun tries 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-Commu nity acquisitions (Intrastat Arrivals) and for intra-Community supplies (Intrastat Dispatches). Electronic submissions via email are allowed.
The threshold for Intrastat Arrivals in 2021 is EUR200,000. The threshold for Intrastat Dispatches in 2021 is EUR150,000. At the time of preparing this chapter, the thresholds for 2022 are not yet known, but are unlikely to change.
Luxembourg taxable persons must complete Intrastat declarations in EUR.
Intrastat returns are due monthly by the 16th working day of the month following the period.
EU Sales Lists. If a Luxembourg 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 taxable person must also file an ESL for services rendered. This ESL must pro vide information regarding services rendered to 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 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. 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.
Correcting errors in previous returns. In principle, a taxable person registered for Luxembourg VAT must to file monthly VAT returns, as well as annual recapitulative VAT returns. The latter returns are the final ones and are assessed by the authorities. Any amendments or corrections to be made regarding monthly returns should be regularized by reporting the correct amounts in the annual recapitulative VAT returns. This does not include a waiver for any penalties due to incorrect filing at the time. However, if the corrections only concern minor amendments/errors, it is unlikely that penalties will be charged.
Digital tax administration. SAF-T. The OECD has developed a standard audit file for tax audits (SAF-T) and a standard set of tests to be performed by the local tax authorities during an audit. Luxembourg has adopted the SAF-T. Ficher d’Audit Informatisé AED (FAIA is the name of the
file to be provided to the Luxembourg tax authorities, and the Luxembourg law allows the tax authorities to carry out electronic VAT audits. The intention of the authorities is to perform all VAT audits paperless. The law outlines that each taxable person (with some exceptions) using an electronic accounting system is obliged to be able to provide the data in a “FAIA” format on request of the tax authorities. In principle, FAIA (which is a file structured under the XML format) must include all the information and data concerning the business activity of the taxable person.