Value Added Tax (VAT) is a tax on turnover.

VAT-liable persons—who must first register for VAT with the Registration Duties, Estates and VAT Authority (Administration de l'enregistrement, des domaines et de la TVA - AED)—charge their customers a tax proportional to the price of the goods sold and/or the services provided.

Taxable persons must forward this tax (output tax), after deducting the VAT they are charged by their own suppliers (input tax), to the Registration Duties, Estates and VAT Authority, which is in charge of collecting it.

Who is concerned

Natural or legal persons are liable for VAT if they independently and regularly conduct operations in connection with the performance of any economic activity, regardless of the aims or results of such activity and regardless of where it is conducted.

Preliminary steps

In order to be able to charge VAT to their customers, the taxable person must register for VAT with the Registration Duties, Estates and VAT Authority (AED), which will assign them a VAT number.

How to proceed

Field of application of VAT

The following operations fall within the field of application of Luxembourg VAT:

• delivery of goods and provision of services, in return for payment, within the country, by a taxable person as part of their business activities;
• intra-Community acquisition of goods, in return for payment, within the country, by a taxable person as part of their business activities, or by a non-taxable legal person;
• intra-Community acquisition of new means of transport, in return for payment, within the country, by a taxable person as part of their business activities, or by a not-taxable legal person, or by any other non-taxable person;
• the importing of goods from non-EU Member States.

However, in certain conditions, these operations may be VAT exempt.

An operation that corresponds to none of these categories is said to fall outside of the field of application of Luxembourg VAT.

VAT rate

At present, 4 different rates are applicable in Luxembourg:

A taxable person's obligations

In particular, a taxable person must:

• submit their declaration to the AED when commencing, changing or discontinuing their activity and inform the same authority of any subsequent changes;
• ensure that an invoice is issued, either by themselves or on their behalf and in their name, by their customer or a third party:
  • for the delivery of goods and provision of services for another taxable person or for a non-taxable legal person; and
  • for deposits paid to them before delivery of the goods or provision of the services;
• archive copies of all invoices issued by themselves or by their customer / a third party on their behalf and in their name, as well as all invoices that they have received, for 10 years from their issue date;
• periodically declare and pay the taxes due, if any;
• file an annual declaration for each tax period corresponding to the calendar year;
• keep proper accounts in sufficient detail to facilitate the application of the tax and checks by the Registration Duties, Estates and VAT Authority (AED). In particular, such accounts must include a clear and distinct breakdown of the data to be filled out in the declarations that the taxable person must file under the terms of the VAT law.

For each calendar month, all taxable persons registered for VAT within the country must, in principle, produce and file a recapitulative statement listing the persons who are VAT-registered in a different EU Member State, to whom they have:

• made an intra-Community supply of goods;
• provided services other than VAT-exempt services in the EU Member State where the operation is taxable, and for which the buyer is subject to VAT.

Since 1 January 2020, the declarations and recapitulative statement must be submitted to the Registration Duties, Estates and VAT Authority (AED) by electronic file transfer using the eTVA and eCDF systems (this is already mandatory for periods from 2017 onwards for recapitulative statements, and from 2015 onwards for VAT declarations).

Taxable persons who ship or transport goods from Luxembourg to another EU Member State must keep a record of the goods for the following activities:

• work done on those goods, materially carried out in the destination Member State to which the goods are shipped or transported, if, once the work has been completed, the goods are shipped back to the purchaser in Luxembourg; or
  
• temporary use of those goods within the territory of the destination Member State to which the goods are shipped or transported, for the purposes of services provided by the taxable person (e.g., professional tools brought by a business into another Member State as part of their professional activity); or
  
• temporary use of those goods, for a period not exceeding 24 months, in the territory of a different Member State, in which the importation of those goods from a third country for temporary use is subject to the regime of temporary admission for complete exemption of import taxes (e.g., professional tools and their accessories necessary for the exercise of a profession or to accomplish a given task; goods destined to be displayed or used at an exhibition, fair, conference or similar event).

A taxable person who has received movable tangible property from a VAT-registered customer in a different EU Member State for the purpose of conducting an assessment of or work on that property must keep sufficiently detailed accounts to enable these goods to be identified.

The taxable person must periodically declare their intra-Community acquisition of goods and services for which they, as the buyer, are liable for tax, and therefore have to pay the tax due.

Taxable persons established outside of the European Union may be required by the Registration Duties, Estates and VAT Authority to put down a deposit or submit a letter of guarantee to ensure payment of the tax and of any fines. This requirement must be fulfilled within one month of the Authority's request to do so.

Taxable persons who are exempt from tax must inform the Registration Duties, Estates and VAT Authority in writing, before 1 March, of the amount of their turnover in the previous year.

Declaration of turnover based on sales

In principle, delivery of goods and provision of services are taxed on the basis of sales figures.

The tax becomes payable:

• at the time of delivery of the goods or provision of the services;
• at the time of issuing of the invoices, when the buyer is a taxable person or a non-taxable legal person, on the understanding that the tax falls due at the latest on the 15th day of the month following that in which the taxable operation takes place;
• at the time of payment of a deposit prior to the taxable operation.

Declaration of turnover based on receipts

A taxable person whose annual turnover before tax is less than EUR 500,000 can apply to be taxed on the basis of their receipts. The tax applicable to deliveries of goods and the provision of services then becomes payable on receipt of full or partial payment for the goods/services. However, such persons may opt to be taxed on the basis of their sales. This exception scheme is aimed at small businesses conducting, either solely or primarily, operations at the final consumption stage (e.g., grocers, butcher's shops, taxis, etc.). This scheme is applicable only to operations which the taxable person conducts within the country, and for which they owe tax. The right to deduction is deferred until the tax on the goods or services provided has been paid to the supplier of the goods or provider of the services.

Entitlement to deduction of input tax

From the tax they charged their customers (output tax), the taxable person deducts the tax applicable to the goods and services they purchase for business purposes (input tax).

This includes the (input) tax:

• charged for the goods and services provided by another taxable person;
• paid or declared for intra-Community acquisitions of goods;
• paid or declared for the import of goods;
• paid or declared as a taxpayer;
• paid as a security deposit on behalf of a taxable person established abroad, on condition that this tax has not been charged by the taxable person in question.

After deduction of the input tax, the taxable person forwards the remainder of the output tax to the Registration Duties, Estates and VAT Authority. In the event of overpayment of the input tax, the taxable person can request a refund.

Payment of tax

Tax must be paid by wire transfer or direct deposit to the bank account of the Recette Centrale:

Account: IBAN LU35 0019 5655 0668 3000

BIC: BCEELULL

The deadline for payment of the tax is identical to the deadline for filing declarations.

The taxable person must clearly state their VAT number and the taxation period for which the payment is to be made.

All taxable persons can view the status of their VAT account in real time using the eTVA Consultation application and their LuxTrust certificate.

Appeals

Taxpayers may lodge an appeal:

• against tax bulletins in connection with adjustments or automatic taxation, notified to the taxable person, who is assumed to have received them on the date of notification appearing thereon. The notification is sent to the address which the taxable person themselves have provided to the Registration Duties, Estates and VAT Authority. Within a month of receiving the bulletin in connection with an adjustment or automatic taxation, the taxable person must pay the tax or additional tax being claimed, whether or not they decide to file an appeal.
• against decisions by the director of the Registration Duties, Estates and VAT Authority, or their representative, imposing the tax penalties provided for in the VAT Law.

The duly substantiated appeal against a bulletin in connection with an adjustment or automatic taxation must be filed in writing with the competent tax office within 3 months of its notification.

If that office rejects the appeal, either in part or in full, the director of the Registration Duties, Estates and VAT Authority is automatically notified of the appeal. In this case, the director re-examines the tax to which the claim pertains. The director's decision supersedes the former taxation imposed and, depending on the case, gives rise to the issuance of a notice confirming, in part or in full, the details of the bulletin against which the appeal was lodged, and/or the issuance of a notice of adjustment of that bulletin. The decision letter states the date of notification on which the taxable person is assumed to have received it.

The director's decision may be appealed. The appeal can be filed by means of a summons to the district court of Luxembourg, which holds jurisdiction in matters of civil law. In order to be accepted, the legal summons must be served to the Registration Duties, Estates and VAT Authority, in the person of its director, within 3 months of the notification date appearing on the letter stating the director's decision.

The procedure is identical for appeals against fines, apart from the fact that these must be addressed immediately to the director of Registration Duties, Estates and VAT Authority.