VAT - e-commerce

E-commerce (electronic commerce) are commercial transactions that are carried out through electronic distribution channels.

There are 2 types of e-commerce:

  • partial or 'offline' e-commerce: the order is made electronically but the delivery or the service is physical.
  • pure or 'online' e-commerce: both the order and the delivery are carried out electronically.

With a maximum VAT rate of 17 %, i.e. the lowest rate in the European Union, Luxembourg offers the best possible conditions for businesses which intend to develop their e-commerce activities.

Who is concerned

The applicable VAT rates for e-commerce vary depending on:

  • businesses who carry out partial e-commerce where the orders are placed electronically but the delivery or the service is physical.
    Examples:
    • distance selling, online shopping sites (clothing, books, shoes, etc.);
    • services for the assembly/installation of furniture;
    • online booking services (plane/train tickets, concert tickets, car rentals, etc.).
  • businesses who carry out pure e-commerce (i.e. 'electronic services') where the order AND the service or delivery are carried out electronically (via internet).
    Examples:
    • the provision and hosting of computer sites;
    • the remote maintenance of programmes and equipment;
    • the provision and updating of software;
    • provision of images, text and cultural documents (music, films, games, etc.);
    • the provision of databases;
    • the provision of distance learning services.

Prerequisites

Businesses who intend to carry out online sales must comply with the legal provisions on:

  • electronic signatures;
  • the information to be provided on an e-commerce website;
  • the presentation of products and services offered to clients;
  • the placing of purchase orders;
  • the handling of orders.

Foreign operators who intend to set up business in Luxembourg must ensure they have a fixed physical establishment in Luxembourg (so called "letter box companies" are not accepted).

Preliminary steps

Businesses established in Luxembourg have to:

Since 1 January 2015, the provision of electronic services (pure e-commerce) by Luxembourg businesses to individuals established in another EU Member State are subject to VAT in the Member State of consumption. The service provider is required to apply the VAT rates in force in the Member State where the client is established and to declare and pay said VAT in the Member State concerned. In order to avoid related administrative procedures in each of the Member States, businesses have the possibility to register with the mini One Stop Shop.

How to proceed

Luxembourg VAT / VAT in other EU Member States

In Luxembourg, the standard VAT rate is 17 %, i.e. the most competitive rate in the European Union (EU).

Certain goods and services are even subject to a lower rate.

Example: electronic books and books in paper format are subject to the super-reduced rate of 3 %.
VAT rates in the European Union Member States (EU)

Member State

Normal rate (%)

Hungary

27

Croatia, Denmark, Sweden

25

Finland, Romania

24

Greece, Ireland, Poland, Portugal

23

Italy, Slovenia

22

Belgium, Spain, Latvia, Lithuania, Spain, Netherlands, Czech Republic

21

Austria, Bulgaria, Estonia, France, Slovak Republic, United Kingdom

20

Germany, Cyprus

19

Malta

18

Luxembourg

17

Source: European Commission

Operators established in Luxembourg benefit from these favourable rates, provided their transactions are subject to Luxembourg VAT. The applicable rate depends mainly on the place of establishment of the clients and on the type of transaction: partial or pure e-commerce.

Partial e-commerce

The type of order (electronic) does not change the applicable rules on VAT.

The rules applicable for transactions under partial e-commerce are as follows:

  • either the VAT applicable to the delivery of goods for any transaction concerning the transfer of property rights of tangible goods;
    Example: a CD ordered via Internet and delivered by post to the client’s address.
  • or the VAT applicable to services for any transaction which does not fall under a delivery of goods.
    Example: online purchase of plane tickets, online reservation of a rental car.

Pure e-commerce

The VAT regime applicable to pure e-commerce transactions of Luxembourg businesses depends on the type and place of establishment of their clients:

  • if the clients are established outside the EU, the transaction will be exempt of VAT in the EU (the buyer of the services will pay VAT in his country of establishment, where applicable*);
  • if the clients are established in the EU:
    • and if they are registered for VAT and the transaction is exempt from VAT in Luxembourg (the client has to pay VAT in his country of establishment);
    • and if the clients are private individuals, the transaction is subject to the VAT in force in the Member State where the buyer is established.
Summary table: provider of goods or services established in Luxembourg

Person established outside the EU

Taxable person established in the EU

Non-taxable person established in the EU

No VAT is invoiced in the EU


(VAT of the client's country of establishment*)

No Luxembourg VAT


Client liable for VAT (reverse charge mechanism)

VAT of the buyer’s Member State

* If VAT does not apply in the non-EU country, the transaction will be de facto exempt.

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