Indirect tax - Luxembourg

Value Added Tax (VAT) is the main type of indirect taxation in Luxembourg.

Created in 1970, VAT (value added tax) is a high yield tax that applies to transactions (goods or services) connected with an economic activity. It represents almost half of the state’s tax revenue.

At each stage of the production and distribution process, the tax only applies to the added value given to the product. Companies thus add VAT to the sale price of their products and deduct the tax relating to the goods or services that contributed to the manufacture of their products or the provision of their services from that ‘collected’ tax. Only the difference between the ‘collected’ tax and the deductible tax is paid to the VAT authorities.

VAT is a general consumption tax. It is levied on all economic activities as defined by the VAT law.

To be subject to VAT, the transaction must involve either the delivery of movable assets (goods) or the provision of services.

The transaction must be connected with an economic activity in the commercial, craft, industrial, agricultural or liberal professions sectors. Some professions, such as professions related to the agricultural sector, benefit from a special regime. Activities not connected with the economic sector do not fall within the scope of VAT. Therefore, the activities of administrative public services that do not compete with those of the private sector are not subject to VAT. Transactions carried out as part of private asset management for individuals are also exempt from VAT. The activities carried out by certain associations might benefit from an exemption regime.

The delivery of goods or the provision of a service is subject to VAT if it involves a consideration which corresponds to the payment of the price agreed between the parties (cash) or the delivery of a good or a service in exchange. It does not matter whether the transaction generates a profit or a loss.

The transaction must be carried out by a taxable person. A taxable person is a person who independently carries out transactions falling within the scope of VAT (taxable or exempt) regardless of legal status, nationality or the aim.

Businesses that made less than €35,000 in the previous year (delivery of goods or services) are exempt from VAT. They do not need to submit a VAT return but they are still obliged to formally register for VAT and to provide the tax authorities with information allowing them to ensure that the threshold of €35,000 has not been exceeded. Businesses benefiting from the exemption cannot charge VAT on their invoices. They therefore cannot offset any input VAT incurred on goods or services supplied to them either.

No.

With effect from 1 January, 2015, Article 58 of Directive 2006/112/EC was amended. The rules determining the place of supply of electronically supplied services supplied to private consumers (B2C) changed from the Member State where the supplier is established to the Member State of the consumer. The result of this is that local VAT is chargeable at the applicable rate in each of the Member States in which electronically supplied services are made (i.e. where the private customer resides). To ensure compliance with this, suppliers have the choice to either register for VAT in each Member State where their customers reside, or elect to register under the former EU VAT Mini One Stop Shop (MOSS) simplification scheme (since June 2021 extended to the OSS system) in a single Member State (where they are established).

Businesses with multiple establishments in the EU can choose which Member State to operate OSS (the Member State of identification). However, the OSS cannot be used to report local sales to customers in a Member State in which suppliers of electronically supplied services have a fixed establishment. Non-EU suppliers without an establishment in a Member State are free to select a Member State of their choosing to operate OSS and become their Member State of Identification.

No. The non-established entity can directly register for VAT in Luxembourg.

Concerning the VAT periodicity, the VAT authorities fix it on the basis of the (expected) total annual turnover of the company, as follows:

• expected annual turnover higher than €620,000: Submission of monthly VAT returns and an additional annual VAT return
• expected annual turnover between €112,000 and €620,000: Submission of quarterly VAT returns and an additional annual VAT return
• expected annual turnover less than €112,000: Submission of an annual VAT return (only).

The decision of the VAT authorities in that respect is notified in the VAT registration notification or when a different tranche of turnover has been reached.

All VAT returns (including the annual one) have to be filed in an electronic format (e-CDF system).

The deadlines for submission of the VAT returns are the following:

• for monthly VAT return: the deadline is before the 15th day of the month following the month for which tax is due
• for quarterly VAT return: the deadline is before the 15th day of the quarter following the quarter for which tax is due
• in case of periodical VAT returns (monthly or quarterly) the deadline for annual VAT return is before 1 May of the following year with a tolerance until 31 December (confirmed each year by VAT authorities)
• in case of single annual VAT return: the deadline is before 1 March of the following year with a tolerance until 31 October (confirmed each year by VAT authorities).

Yes. If a VAT return is submitted late a penalty can be imposed (between €250 and €10,000 per late return).

Failure to pay within the statutory period may also be punished by a fine of up to 10%of the tax due per year.

Businesses that are registered for VAT in Luxembourg and make supplies of goods or services to traders’ registered in other EU countries are required to complete EC sales Listings (ECLs).

In principle the submission of the ECLs for goods is on a monthly basis. By way of derogation, a quarterly submission can be authorised if the total amount of intercommunity deliveries of goods and/or triangular operations does not exceed €100,000.00 during the quarter concerned nor in respect of the four previous quarters.

If the taxable person does not exceed the threshold indicated above, he can choose to submit the listings either on a monthly or on a quarterly basis. There is no formal procedure for choosing, and no need to inform the VAT authorities.

The submission of the ECLs for services can be monthly or quarterly. It is up to the taxpayer to decide. There is no threshold, no formal procedure for choosing, and no need to inform the VAT authorities.

The periodicity for ECLs for services is in no way linked to the periodicity for filing ECLs for goods (and vice versa).

The ECLs must be submitted via internet, using the ‘eCDF’ system of the Luxembourg VAT authorities.

The deadline for filing the listings is before the 25th day of the month following the reporting period .

To correct an ECL, the taxable person should simply report the corrections in the following ECL, via the respective boxes of the form.

In addition, if the value of the intra-EU trade of goods dispatched or arriving from another EU member state is above an annual threshold (€200,000 for acquisition of goods and €150,000 for delivery of goods), a supplementary declaration (referred to as an Intrastat declaration) has to be submitted for either or both. These returns have to be submitted on a monthly basis.

The thresholds are the following – type of return:

Thresholds              Annual values of the intercommunity operations (in €)

The deadlines are either (always on a monthly basis):

• within six working days after the end of the month of reference (in case of paper submission)
• within 16 working days after the end of the month of reference (in case of electronically submission).

Yes. A range of penalties can be imposed when businesses do not comply with the VAT rules.

Anyone who tries, in some way, to evade payment of tax or to obtain in a fraudulent or improper manner a tax refund, is subject to a tax penalty of between 10% and 50% of the evaded tax or the tax fraudulently obtained.

The tax penalties are imposed by the director of administration or his delegates, payable within one month after notification of the written decision.

Criminal proceedings may be brought to court in case of more serious matters.

Yes, it may be possible to reclaim the VAT incurred in certain circumstances.

Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.

The EU cross border refund scheme is available in all EU member states, and enables a business established in an EU country to recover VAT incurred in another member state (in which it is not VAT registered). To be eligible to make a claim, the claimant must be a taxable person established in an EU member state other than the one from which the claim is to be sought.

In addition, the claimant:

• must not be registered, liable, or eligible to be registered in the member state from which he is claiming the refund
• must have no fixed establishment, seat of economic activity, place of business or other residence there during the refund period he must not have supplied any goods or services in the member state of refund, apart from certain limited exceptions.

The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically with an authenticated e-signature to the tax authority from whom the repayment is being sought.

The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.

Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into Luxembourg or purchases of goods and services used in Luxembourg. The scheme is available to any person carrying on a business established in a third country ie outside the EU, provided that in the period of the claim:

• he was not registered or liable to be registered for VAT in Luxembourg
• he was not established in any EU country
• he made no supplies of goods and services in Luxembourg other than certain specified exceptions
• where he is established in a third country having a comparable system of turnover taxes, unless the Luxembourg tax authority allows otherwise, that country provides reciprocal arrangements for refunds to be made to taxable persons established in Luxembourg.

Claim forms have to be submitted to the Luxembourg tax authorities no later than six months as from the end of the relevant year ie by 30 June each year.

The following information has to be mentioned on the invoices for VAT purposes:

• the date of issue
• a sequential number, based on one or more series, which uniquely identifies the invoice
• the VAT identification number under which the taxable person supplied the goods or services
• the customer’s VAT identification number under which the customer received a supply of goods or services in respect of which he is liable for the payment of VAT or received a supply of goods as referred to in Article 43(1)(d),(e) and (f)
• the full name and address of the taxable person and of the customer
• the quantity and nature of goods supplied or the extent and nature of services rendered
• the date on which the supply of goods or services was made or completed or the date on which the payment on account was made, in so far as that date can be determined and differs from the date of issue of the invoice
• the taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit price
• the VAT rate applied
• the VAT amount payable, except where a special arrangement is applied for which such a detail is to be excluded
• where an exemption is involved or where the customer is liable to pay the VAT, reference to the applicable provisions of Directive 2006/112/EC or to the corresponding provision of VAT act, or in case the liability is shifted to the recipient that the supply is subject to the reverse charge procedure.