Any transaction involving the transfer of ownership of a tangible good constitutes a supply of goods. On the other hand, the provision of a service or the rental of a tangible good does not fall under the regime applicable to the supply of goods.
The supply of a good is subject to value added tax (VAT) in Luxembourg if the supply takes place in the country. The place of execution of the taxable service determines whether Luxembourg VAT is applicable or not.
Principle: the criterion of the place of departure
The supply of goods is in principle taxable in Luxembourg if the goods are located there at the time of departure, shipment or transportation to the buyer, regardless of their destination and irrespective of whether the shipment or transportation is carried out by the supplier, the buyer or a third party.
However, Luxembourg VAT is not applicable if the goods are located in another EU State at the time of shipment to the buyer.
However, the place of destination is deemed to be in Luxembourg if the goods are shipped from a non-EU country and if the company in Luxembourg is the importer of the goods. In this case, Luxembourg VAT should be applied.
- a Luxembourg business ships goods from Luxembourg to a private Belgian customer: Luxembourg VAT should be applied;
- the same business ships its goods to Germany from its storage warehouse located in Germany: Luxembourg VAT does not apply and German VAT should be applied instead;
Exception: distance selling to private individuals
There is a major difference in respect of the place of departure concerning distance selling.
Distance selling generally covers all sales of goods which are dispatched or transported (directly or indirectly) by the seller to an individual, private consumer who is not subject to VAT and established in an EU Member State.
Distance sales made to consumers residing in another EU Member State are fully taxable in that other Member State if the supplier makes intra-Community sales in that Member State in excess of EUR 10,000 per year excluding tax.
The supplier can also opt for immediate taxation in the consumer’s Member State of residence. In this case, the VAT of that other Member State will apply as of the first sale, irrespective of the amount.
- in 2022, a Luxembourg company (which does not provide services) makes distance sales to France in the amount of EUR 5,000. In 2023, the same company makes a distance sale in the amount of EUR 4,000 and then another of EUR 5,000. The European limit for distance sales is set at EUR 10,000, and because it has not been exceeded, these sales are subject to Luxembourg VAT, unless of course the company has opted for taxation at destination, in which case French VAT should apply to all sales made.
- the same Luxembourg company, which did not exceed the EUR 10,000 limit for intra-Community distance sales in 2022, makes the following distance sales in 2023 in the amount EUR 25,000:
- a first distance sale of EUR 9,000, which, unless it opted for taxation at destination, remains subject to Luxembourg VAT;
- a second sale of EUR 16,000, to which French VAT is applicable in full, as well as on the amount of all subsequent sales, insofar as this second sale took the business above the European limit of EUR 10,000.
Supply of goods between taxable persons based in the EU
Even though VAT of the place of departure is applicable in principle, the seller is exempt from VAT in the country of shipment (departure) and VAT is levied in the country of purchase.
To do this, sellers based in the EU must prove that the merchandise is delivered to a taxable business in another Member State by indicating the buyer’s European VAT number number on the invoices issued.
The VAT must be paid by the buyer because of the removal of tax frontiers. The taxable amount and the VAT due are indicated by the buyer on its VAT return.
Specific regimes are provided for, in particular:
- in respect of triangular transactions;
- for tailored work (this consists in taking a good belonging to the customer and altering it in some way): such transactions are considered to be a supply of services and benefit from an exemption at the time of delivery.
The tax paid by the buyer in respect of an intra-Community acquisition is deductible if included on its VAT return.
Supply of goods to private individuals
For 'distance selling' to private individuals or persons benefiting from an exemption, the VAT applicable depends in particular on the value amount of sales in the destination country:
- the seller is established in Luxembourg and the amount of their distance selling exceeds during the calendar year, or exceeded during the previous calendar year, the limit of EUR 10,000 excluding tax => VAT is due in the country of destination;
- the seller is established in Luxembourg and the amount of their distance selling does not exceed in the course of the calendar year, or did not exceed in the course of the previous calendar year, the limit of EUR 10,000 excluding tax => taxation takes place in Luxembourg, except in the case of an option for taxation in the country of destination;
- the seller is established in another Member State, their annual intra-Community sales exceed the limit of EUR 10,000 excluding tax and they sell goods to Luxembourg => taxation takes place in Luxembourg.
- supply of new means of transport (e.g. new cars with less than 6,000 km or less than 6 months old);
- supply of used means of transport, which fall under the margin scheme;
- supply of goods after assembly or installation, with or without a commissioning test, by or on behalf of the supplier;
- supply of second-hand goods, works of art, collectors' items or antiques which fall under the margin scheme.
Declaration obligations in matters of VAT
The obligations are the consequence of the absence of control and declaration when crossing borders within the EU.
Businesses liable for VAT must:
- have a European VAT number which must appear on all invoices to EU countries;
- issue invoices including for the payment of deposits where applicable;
- include, as applicable, the following items in their accounts: 'intra-Community acquisition' or 'intra-Community supply';
- state the amount of intra-Community transactions on VAT returns and pay VAT on intra-Community acquisitions;
- submit recapitulative statements concerning the intra-Community supply of goods.