VAT - Supply of services

Last update 26.01.2023

The 'supply of services' refers to all transactions that do not constitute a supply of goods nor an intra-EU acquisition or import of goods.

It includes the sale of a service or the rental of tangible goods but not the sale of a tangible good.

The VAT applicable to the provision of services depends on the type of customer and the type of service.

VAT is, in principle, payable:

  • in the customer's country of establishment in the case of a provision of services between taxable persons ("B2B – Business to Business", i.e. between professionals);
  • in the service provider's country of establishment in the case of the provision of services to end consumers ("B2C – Business to Consumer", i.e. between professionals and consumers).

Some services are an exception to this rule, for both taxable and non-taxable persons.

Who is concerned

The obligations regarding the application of VAT with respect to the provision of services must be observed by any business subject to VAT and that:

  • provides taxable services in another country of the European Union (EU);
  • or receives services provided by foreign businesses.

Preliminary steps

Businesses liable for VAT in Luxembourg must:

How to proceed

Principle

B2B – VAT in the customer's country of establishment

Services provided between taxable persons ('B2B') are in principle subject to VAT in the customer's country of establishment, i.e. in the country in which its registered office is located or, failing this, where it has a permanent establishment which is receiving the services.

B2C – VAT of the service provider's country of establishment

Services provided to non-taxable persons ('B2C') are in principle taxable in the service provider's country.

Example: if a Luxembourg lawyer provides services to a private individual established in Belgium, said services shall be deemed to be located in Luxembourg. The Luxembourg lawyer must therefore issue an invoice including Luxembourg VAT, unless the lawyer provides intra-Community services to individuals that exceed the threshold of EUR 10,000 excluding tax.

Exceptions common to both B2B and B2C relationships

Building-related services

VAT is due in the country in which the building is located.

Example: a French company carries out work on a building located in Luxembourg on behalf of a Belgian company. Luxembourg VAT applies, because the building is located in Luxembourg. The French service provider must therefore register for VAT in Luxembourg.

Transportation of persons

VAT is due in the various countries travelled through based on the distance covered.

Example: a German coach company transports passengers from Trier to Brussels via Luxembourg. Passenger transport services are taking place in Germany, Luxembourg and Belgium. The company will need to register for VAT in each of the 3 countries (unless an exemption scheme is provided for), or the German company avails itself of the special One-Stop-Shop regime.

Services in the areas of culture, arts, sports, science, education, entertainment and similar events

VAT is due in the place where these events actually take place.

Example: a Belgian company buys entrance tickets to a show in Luxembourg for its clients. Luxembourg VAT must be applied, because the event takes place in Luxembourg.

Catering services (other than on board a train, boat or aircraft)

VAT is due in the country in which the service is materially executed.

Short-term leasing of means of transport

VAT of the country where the lessee will take possession of the means of transport applies.

A means of transport is a vehicle whether or not it is motorised or any other equipment devised for the transportation of goods or persons from one place to another, which may be drawn, towed, or pushed by vehicles.

Short-term leasing is defined as being leasing of less than 30 days (other than in the case of boats for which the leasing period is 90 days).

Example: a Luxembourg company rents a vehicle in Germany for 15 days. German VAT is applicable.

Exceptions in B2C relationships

Services provided by intermediaries acting on behalf of others

VAT is due in the country in which the main transaction is carried out.

Intra-EU transportation of goods

VAT is due in the country of departure of the goods.

Transportation of goods other than in intra-EU transportation

VAT is due in the various countries travelled through based on the distance covered.

Transport-related services

VAT is due in the country in which the service is materially executed.

Example : a Luxembourg tourist has his car repaired in Spain. The Spanish mechanic shall apply Spanish VAT on the service provided.

Work on and valuation of movable tangible property

VAT is due in the country in which the service is materially executed.

Provision of intangible or intellectual services outside the EU

VAT is due in the customer's country.

The following are considered to be 'intangible services':

  • transfer and concession of copyrights, patents, licences, brands;
  • advertising services;
  • legal, consulting, chartered accountant, engineering services, etc.;
  • data processing and provision of information;
  • financial, insurance and reinsurance transactions;
  • provision of personnel;
  • rental of movable tangible assets (other than the rental of means of transport which remains subject to the principle of origin);
  • provision of access to natural gas or electricity distribution systems or heating or cooling networks (and directly related services);
  • services provided electronically.

Example: a Luxembourg e-commerce undertaking provides online training to a person in the USA. As the service is purchased by a customer based in a non-EU country, Luxembourg VAT is not applicable.

Services in the fields of telecommunication, radio broadcasting and television

VAT is due in the customer's country of establishment, unless the non-taxable person is established outside of the EU.

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