VAT Luxembourg GST Essentials

GLOBAL INDIRECT TAX
Luxembourg
Country VAT/GST Essentials
kpmg.com
TAX
b | Luxembourg: Country VAT/GST Essentials
2012 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Luxembourg:
Country VAT/GST Essentials
Contents
Scope and Rates 2 Invoices 10
What supplies are liable to VAT? 2 What do I have to show on a tax invoice? 10
What is the standard rate of VAT? 2 Can I issue invoices electronically? 10
Are there any reduced rates, zero rates, or exemptions? 2 Is it possible to operate self-billing? 10
Registration 4 Transfers of Business 11

Who is required to register for Luxembourg VAT? 4 Is there a relief from VAT for the sale of a business
Are there penalties for not registering or late registration? 4 as a going concern? 11
Are there any simplifications that could avoid the need for Options to Tax 11
an overseas company to register for VAT? 4
Are there any options to tax transactions? 11
VAT Grouping 5
Head Office and Branch Transactions 12
Is VAT grouping possible? 5
How are transactions between head office and branch
Can an overseas company be included in a VAT group? 5 treated? 12
Returns 6 Bad Debt 12
How frequently are VAT returns submitted? 6 Am I able to claim relief for bad debts? 12
Are there any other returns that need to be submitted? 6
Anti-Avoidance 13
VAT Recovery 7 Is there a general anti-avoidance provision under
Can I recover VAT if I am not registered? 7 VAT law? 13
Does your country apply reciprocity rules for reclaims
Penalty Regime 13
submitted by non-established businesses? 7
What is the penalty and interest regime like? 13
Are there any items that you cannot recover VAT on? 7
International Supplies of Goods and Services 8

How are exports of goods and services treated? 8
How are goods dealt with on importation? 9
How are services which are brought in from abroad
treated for VAT purposes? 9
All information reflected in this document was obtained/summarized from KPMG in Luxembourg as of October 2011.
2 | Luxembourg: Country VAT/GST Essentials
Scope and Rates

What supplies are liable to VAT? Are there any reduced rates, zero rates, or exemptions?
Value-added tax (VAT) is due on any supply of goods or Yes (please note that the lists set out below are non-
services made in Luxembourg, where it is a taxable supply exhaustive). There is an intermediary rate of 12 percent for
made by a taxable person in the course or furtherance of a certain goods and services, including:
business carried out independently by any person or legal
entity on a regular basis. Supply includes all forms of supply. some wines
It is not restricted to the provision of goods and services fuel other than gas and electricity (solid mineral fuels,
by way of sale but can apply equally to other forms of mineral oils, and wood intended for use as fuel)
transaction, including the leasing or hire of goods, the grant,
assignment, or surrender of a right, an agreement not to commercial printings
carry out a business, or perform services. custody services
Supply does not include anything done otherwise than for clothing manufactured by a tailor
a consideration. However, certain actions carried out for no
consideration are deemed to be supplied; for example private heat, refrigeration, and steam excluding heat furnished
use of business assets and free gifts. by a heating system
management of credits and credit guarantees by a
What is the standard rate of VAT? person or an institution other than those who are
granting the credits.
The Luxembourg standard rate of VAT is 15 percent.
In addition, there is a reduced rate of 6 percent for certain
goods and services, including:
electricity
gas
heat furnished by a heating system
plants
repairs on items such as bikes, shoes, leather articles,
etc.
hairdressing
alterations to clothes and household linen
cleaning of private housing.
Luxembourg: Country VAT/GST Essentials | 3
There is a further reduced rate of 3 percent for certain goods The list of zero-rate supplies includes:
and services, including:
exports
human and animal food excluding alcohol drinks
intra-Community supplies of goods
books (excluding advertising and pornographic content),
supplies of goods and services used by airlines operating
newspapers, and periodicals
for reward chiefly on international routes
childrens shoes and clothing
services supplied for the needs of seagoing vessels
passenger transport
goods and services supplied under diplomatic and
hotel accommodation consular arrangements, and to recognized international
organizations
certain sporting and cultural services
international passenger transport.
burial and cremation
The list of exemptions includes:
therapeutic instruments and medical equipments for
disabled persons certain banking and financial services
certain pharmaceutical products management of Investments funds, SICAR, some
foods and drinks to be consumed on the spot pension funds, and securitization vehicles under specific
conditions
collection and processing of domestic waste
insurance and reinsurance
copyrights
supply and letting of immovable property (there is an
construction and renovation costs for personal dwellings option to tax under certain conditions)
(under certain conditions)
postal services
distribution of water
betting, games of chance, and lotteries
reception of radio and television broadcasting services
other than those whose content is exclusively education
addressed to adults regardless of the electronic certain medical supplies.
communication network used (since January 1, 2008).
It is in principle not possible to recover VAT incurred in
making exempt supplies. However, in some particular
circumstances, a recovery right might exist despite the
existence of a Luxembourg VAT exemption.
Registration
Who is required to register for Luxembourg VAT? If your business is established outside the EU and you
render electronically supplied services to customers in
Luxembourg Entities Luxembourg who are not VAT registered, then the place
Any person established in Luxembourg who independently of supply is in principle Luxembourg. You will then have to
carries out any economic activity is deemed to be a VAT register for Luxembourg VAT. If, however, you supply the
taxable person and, in principle, should therefore be same services to customers in other EU Member States
registered for VAT purposes in Luxembourg within 15 days of you can opt to register for VAT in one Member State rather
the effective start of the activity. Please note that a person than all of them. In this case you still have to account for VAT
only performing VAT exempt activities may be relieved from on supplies you make at the rate prevailing in the country of
the required VAT registration in Luxembourg unless it is liable your customer but you only have to deal with one Member
to self-account for Luxembourg VAT on services received State for filing and payment purposes.
from abroad falling within the scope of the reverse charge
mechanism or performs intra-Community acquisitions of Access the VAT registration forms on the Luxembourg tax
goods above the threshold of EUR10,000 per year. authoritys web site: http://www.aed.public.lu
Are there penalties for not registering or late

Non-Luxembourg Entities registration?
The registration rules that apply to Luxembourg entities also
apply to non-Luxembourg entities which are making taxable Failure to register for VAT promptly may result in a penalty of
supplies in Luxembourg. However, there is no minimum VAT between EUR50 EUR5,000. Please note that this penalty
registration threshold for businesses not established shall apply not only to failures to register but to any other
in Luxembourg. infringement of Luxembourg VAT requirements. Besides,
absence or late payment of the VAT due may give rise to
If your business is not registered for VAT in Luxembourg but an additional penalty amounting to 10 percent of the entire
sells and delivers goods from another European Union (EU) VAT due.
Member State to customers in Luxembourg who are not VAT
registered (distance sales), where the value of those sales Moreover, notwithstanding penal sanctions, any person who
exceeds a threshold of EUR100,000 (as of 1 April 2004), your has fraudulently tried to avoid the payment of VAT or has
business is required to register and account for VAT illegitimately recovered VAT is punishable by a penalty of
in Luxembourg. 10 percent of the VAT evaded.
VAT Grouping
Are there any simplifications that could avoid the need Is VAT grouping possible?
for an overseas company to register for VAT? Not as such, but cost-sharing exemption may apply (article
It is possible to avoid registering and accounting for 132, 1 (f) of the Council Directive 2006/112/EC; (article 44, 1 y)
Luxembourg VAT when making certain supplies. LVAT) provided various criteria are met and that competition is
not distorted. Note that the members of the VAT group do not
In the following examples the obligation to account for the become a single taxable person, so charges between them
VAT due can be shifted to your customer provided that the are not disregarded.
latter is registered for Luxembourg VAT.
The main conditions are as follows:
Triangulation Transactions covered: Certain services rendered by
If your business is an intermediate supplier to a Luxembourg independent groups to their members are VAT exempt.
buyer of goods which you purchase from a business in an The services must be directly necessary for the exercise
EU Member State other than your own and are delivered of the activity of the members. However, it is no
from there to Luxembourg, VAT due can be accounted for by longer required for all members to receive all services
Luxembourg customer (see section Invoices). performed by the group.
Status of the group: It is not required that the group is
Imports legally incorporated but it must act independently under
Taxable persons performing imports of goods in Luxembourg its own separate name when dealing with its members.
and subsequent sales/processing which are neither
established nor registered for VAT purposes in Luxembourg Status of the members: Members of the group must
can opt to appoint a VAT representative in Luxembourg (as exercise the same type of activity or belong to the
from 1 January 2008). same financial, economical, professional or social
group. All group members must be established
within the European Union. They must carry out VAT-
Call-Off Stock exempt activities (insurance companies, banks, fund
No simplification provisions apply. management companies, hospitals, etc.) or should not
be subject to VAT (holding companies, public bodies,
Capital Items etc.). The VAT exemption remains applicable, however,
The sale of capital items is not included in the calculation of if a member or members perform taxable business
turnover for Luxembourg VAT registration purposes. provided the turnover of such business does not exceed
30 percent of the total turnover. Exceeding this limit
does not, however, jeopardize the benefit of the VAT
Supply and Install exemption to the extent it does not exceed 50 percent
No simplification provisions apply. of this 30 percent and only for a maximum of two
consecutive years.
Reverse Charge Services Sharing of costs incurred by the group: The group must
Since 1 January 2010 the supply of services by a foreign claim from its members the exact reimbursement of
supplier to a Luxembourg taxable person abroad fall in their share of the joint expenses.
principle under the reverse charge mechanism which is
covered in more detail at section International Supplies of
Can an overseas company be included in a VAT group?
Goods and Services.
Only EU-based entities can be members of such group.
Returns
How frequently are VAT returns submitted? ESLs are also mandatory for the supply of services which are
Most registered businesses are required to submit VAT rendered by Luxembourg taxable persons to VAT registered
returns on a monthly basis. However, if your annual turnover business customers established in other EU Member States
is between EUR112,000 and EUR620,000, VAT returns are and which are not VAT exempt in those Member States.
submitted on a quarterly basis. If your annual turnover does The taxable person can make submissions on a monthly or
not exceed EUR112,000, the VAT returns must be submitted quarterly basis (no threshold). The frequency for ESL for
on an annual basis only. services is not linked to the period for filing ESL for goods.
In addition, all businesses which are required to submit VAT In case of monthly submissions for goods and services,
returns on a monthly or quarterly basis, must in addition the ESL must be submitted electronically. For quarterly
submit an annual summary VAT return. submissions, the ESL can be submitted either on paper
format or electronically. The deadline for filing the listings
Failure to submit VAT returns or settle any outstanding VAT is the 15th day of the month following the reporting period
on time may result in a penalty of between EUR50 to if the listing is submitted in paper format and the 25th
EUR5,000. Moreover, late payment or failure to pay VAT day of the month following the reporting period if filed
due may be subject to late payment interests. electronically.
Are there any other returns that need to be submitted? Intrastat Declarations
VAT registered businesses with a value of dispatches or
European Sales List (ESL) arrivals to or from other EU Member States, which exceed
If your business supplies goods which are shipped from a certain threshold (EUR150,000 per calendar year for
Luxembourg to VAT registered businesses in other EU the dispatches, EUR200,000 per calendar year for the
Member States and you wish to zero rate the supply (see acquisitions) must complete Intrastat declarations each
section International Supplies of Goods and Services) you month.
are required to file ESLs.
The late submission of Intrastat returns may result in a
In principle, ESL for goods must be submitted on a monthly penalty of between EUR251 to EUR2,500.
basis, although quarterly submissions is allowed if the total
Access Intrastat returns on the Department of Statistics web
amount of intra-Community deliveries of goods does not
site: http://www.statec.public.lu/fr/index.html
exceed EUR100,000 during the quarter concerned or in
respect of the four previous quarters. If the EUR100,000
threshold is exceeded in a single quarter, the taxable person
is automatically required to submit listings on a monthly
basis for the remaining months of the quarter and for at least
the four following quarters.
VAT Recovery
Can I recover VAT if I am not registered? Does your country apply reciprocity rules for reclaims
Yes. If you are established in another EU Member State submitted by non-established businesses?
then you should make a claim under Directive 2008/9/EEC of No reciprocity rules apply as such. However, the taxable
12 February 2008. If you are a non-EU business you should person or legal entity applying for a VAT refund in
recover the VAT under the 13th Directive. Luxembourg shall submit together with the fund reclaim,
either a statement proving that an economic activity is
Under both of these provisions there are strict time limits carried out in the home country or a certificate provided by
and minimum thresholds for making claims. Under the the home country stating its VAT (or any equivalent turnover
Directive 2008/9/EEC, the claim period must not be longer tax) reference.
than one calendar year but must cover at least three months,
unless it relates to the end of a calendar year. Claims for
less than a full year but more than 3 months must be for at Are there any items that you cannot recover VAT on?
least EUR400. Annual claims or claims in respect of the last Yes. There are certain items that you cannot recover VAT on.
part of the year must be for at least EUR50. Under the 13th For example:
Directive, the claim period must cover the calendar year and
must be for at least EUR250. Exempt supplies: Where VAT relates to both taxable and
exempt supplies without credit, you need to make an
Please note that 13th Directive reclaim should be filed in apportionment.
Luxembourg when Luxembourg VAT has been incurred by the
Non-business (including private) activities: Where VAT
requester. Reclaims based on Directive 2008/9/EEC should
relates to both business and non-business activities, an
be filed in the country where the requester is established
apportionment is required.
(i.e. Luxembourg) for all non-Luxembourg VAT incurred. This
request has to be made electronically through Luxembourg Motor cars (excluding commercial vehicles): Where cars
VAT authoritys web portal. are used for business and private purposes, related input
VAT is in principle recoverable but output VAT is due on
The deadline to submit the claims is 30 June of the following private use determined according to effective use, lump-
year for 13th Directive claims whereas it is 30 September for sum computation is also allowed according to current
claims based on Directive 2008/9/EEC. practice.
Access the Directive 2008/9/EEC claim portal on the Business entertainment: VAT on expenses that do not
Luxembourg tax authoritys web site: http://www.vatrefund.lu strictly qualify as business expenses, such as luxury or
entertainment expenses may not be recovered.
Access the 13th Directive claim forms on the Luxembourg
tax authoritys web site: http://www.aed.public.lu Purchases falling within the Tour Operators Margin
Scheme: The VAT on goods and services which fall under
this scheme cannot be reclaimed.
Goods sold under one of the margin schemes for second
hand goods: There are a number of schemes which
provide for VAT to be accounted for on the goods sales
margin, but do not allow VAT recovery on the purchase of
those goods.
International Supplies of Goods and Services

How are exports of goods and services treated? Services
If you are a Luxembourg established business and supply
Goods services to a foreign business customer (B2B), in general the
If you sell goods to a customer who is registered for VAT in supply of services is taxable in the country of the recipient
another EU Member State and the sale involves the dispatch under the reverse charge mechanism. If you however supply
or transport of those goods from Luxembourg (either by you services to a private consumer (B2C), the services are in
or your customer) to that other EU Member State, then you general taxable in the country of the supplier and therefore
do not need to charge VAT and may zero rate the supply as subject to Luxembourg VAT.
an intra-EU dispatch. You must obtain your customers VAT
number and quote it on your invoice. You should also obtain The following exceptions apply to the B2B and B2C main
evidence of the goods removal from Luxembourg. rules as described above:
If you sell goods to a customer who is not registered for Services involving real estate (taxable in the country
VAT in another EU Member State, you will have to charge where the real estate is located).
Luxembourg VAT. If your sales exceed a certain threshold for Restaurant and catering services (taxable in the country
that Member State you may have to register in the Member where these services are performed. Other rules apply
State under what is known as the Distance Selling Scheme. if these services are performed on board a ship, aircraft,
or train).
If you export goods to a customer (business or private)
outside of the EU, then you do not need to charge VAT but, Passenger transport (taxable in we country here the
as for intra-Community sales, you should make sure that in transport services are actually performed).
all cases you keep proof of dispatch/delivery to support your
Services with regard to cultural, artistic, sporting,
zero rating.
scientific, educational, entertainment, and similar
activities, along with the ancillary services (taxable in the
country where those activities are physically carried out).
With effect from 1 January 2011, this exception applies
to services performed for VAT entrepreneurs only with
respect to admission to the aforementioned events and
the appurtenant admission related services. Nothing
changed as of 1 January 2011, with regard to services
performed for non-taxable persons.
Short term hiring of transportation vehicles (for ships
maximum 90 days/for other means of transport
maximum 30 days; taxable in the country where the
vehicle is actually put at the disposal of the customer.
The following exceptions apply to the B2C main rule: How are goods dealt with on importation?
When goods are imported into Luxembourg from outside the
intermediary services (taxable in the country where the
EU, import VAT and customs duty may be due.
underlying transaction is taxable)
intra-Community transport of goods (taxable in the VAT due on import might be physically paid upon import
country of departure). For other types of goods but in principle should be reported in the VAT return of
transportation for non-taxable customers, the place of the period.
service is the place where the transportation is actually
performed How are services which are brought in from abroad
transportation-related services (taxable in the country treated for VAT purposes?
where the services are physically carried out) As from 1 January 2010, the reverse charge mechanism has
services involving movable tangible goods (taxable in the been generalized and applies to all services bought in from
country where the activities are actually carried out) outside Luxembourg, except if based on the nature of the
services, an exception applies.
services performed electronically by a VAT entrepreneur
not established in the EU to non-taxable customers If you buy in services rendered by a supplier established
(taxable in the country where the customer of the outside Luxembourg as a taxable person, you will be
service is located). required to apply the reverse charge unless a VAT exemption
is applicable or a service received is an exemption to the
The following services performed for non-taxable customers
general rule. This is intended to take away any VAT advantage
that are established or resident outside the EU are taxable in
of buying those services from outside Luxembourg.
the country where the customer is established:
Under the reverse charge, you are required to self-account
the transfer of licenses and similar rights
for the Luxembourg VAT through the VAT returns, unless a
advertising services VAT exemption applies.
services performed by consultants, as well as data- If you are entitled to fully recover input VAT paid, the
processing and information-provision services reverse charge should not constitute cost factor but a VAT
the obligation to refrain, in whole or in part, from compliance matter. However, if your activities are partly VAT
pursuing a business activity exempt, there should likely be a VAT cost depending on
the level of recovery allowed under your partial exemption
banking and insurance services method.
supply of staff
hiring out of movable property, with the exception of
means of transport
operating natural gas and electricity-distribution systems
telecommunications services
radio and television broadcast services
services performed electronically.
Invoices
What do I have to show on a tax invoice? where an exemption is applicable or where the
If you have to issue a tax invoice it should contain the following customer is liable to pay the tax, a clear reference to the
data: appropriate provision of the EC VAT Directive, or to the
corresponding provision in Luxembourg VAT law, or to
date of issue any indication that the supply is exempt or subject to the
reverse charge procedure
a sequential invoice number. If the invoice adjusts an
earlier invoice (such as a credit note), unambiguous where the intra-Community supply of a new mean
reference should be made to the original invoice of transport is involved or where the margin scheme
applies, the invoice must contain other specific
suppliers VAT identification number
information
Where the customer is liable to self-account for and pay
amounts appearing on invoices may be expressed in
the tax on goods supplied or services rendered, its VAT
any currency provided that the amount of VAT payable is
identification number under which these supplies were
expressed in Euro
performed (services supplied under the reverse charge
mechanism, intra-Community deliveries of goods and invoices may be drafted in any language provided that
triangular sales) the VAT due is computed in Euro in accordance with
the last exchange rates as admitted by the Luxembourg
suppliers name and address
Central Bank or other accredited banks based on the
customers name and address rates set out by the European Central Bank. Note that a
French or German translation may be required in case
the quantity and nature of the goods/services supplied
of audit.
the date on which the supply of the goods or services
Can I issue invoices electronically?
was made or completed or the date on which an
advance payment was made, insofar as that date can Yes. The invoices authenticity of origin and the integrity of
be determined and differs from the date of issue of the its contents must be ensured either by advanced electronic
invoice signature or by Electronic Data Interchange (EDI) as defined
the taxable amount per rate or exemption in the recommendation 1994/820/CE issued by the European
Commission.
unit price (exclusive of any VAT)
Is it possible to operate self-billing?
rate of any discounts (if not included in the unit price and
if applicable) Yes, provided you have the agreement of your supplier
the VAT rate applicable before doing so.
the amount of VAT payable in Euros, except where a

specific regime is applied and for which the VAT law
excludes such a detail (examples include margin regime
and special regime for small enterprises)
Transfers of Business Options to Tax

Is there a relief from VAT for the sale of a business as a Are there any options to tax transactions?
going concern? There is an option to tax certain types of transactions in
Yes. If you sell your business as a going concern, then VAT immoveable property:
may not be due. There are certain conditions to be met, for
example the purchaser should intend to use the assets to supply
carry on business. letting/leasing.
In order to apply VAT on the transactions, the supplier must
meet certain conditions and complete certain formalities
according to article 45 of the VAT Law and to the Grand
Ducal Decree dated 7 March 1980.
Head Office and Branch Transactions Bad Debt

How are transactions between head office and branch Am I able to claim relief for bad debts?
treated? You are able to claim back VAT on the unpaid element
Supply of services between head office and a branch are through your VAT return. If you subsequently receive
disregarded for VAT purposes. payment for the supply, then you will have to pay back the
VAT amount to the tax authorities in the same way (i.e.
through the VAT return).
Anti-Avoidance Penalty Regime

Is there a general anti-avoidance provision under What is the penalty and interest regime like?
VAT law? Failures in relation to compliance obligations (such as,
No, but there is use and enjoyment provisions for some filing of VAT returns, issuing of invoices, keeping records,
services. paying VAT, proper bookkeeping, registration, provision
of information to the tax authorities, etc.) may result in a
penalty of between EUR50 to EUR5,000 per infringement.
In cases of fraudulent activity, notwithstanding penal

sanctions, a fine which could amount to 10 percent of the tax
eluded could be applied.
In addition, late payment or failure to pay VAT due may be

subject to a VAT fine for late payment that may not exceed
10 percent per year of the tax due.
www.kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.
2012 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent
firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to
obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such
authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.
Designed by Evalueserve.
Publication name: Luxembourg Country VAT/GST Essentials
Publication number: 111202
Publication date: January 2012

VAT Luxembourg GST Essentials

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VAT Luxembourg GST Essentials

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GLOBAL INDIRECT TAX

Registration 4 Transfers of Business 11

International Supplies of Goods and Services 8

Scope and Rates

Are there penalties for not registering or late

International Supplies of Goods and Services

the amount of VAT payable in Euros, except where a

Transfers of Business Options to Tax

Head Office and Branch Transactions Bad Debt

Anti-Avoidance Penalty Regime

In cases of fraudulent activity, notwithstanding penal

In addition, late payment or failure to pay VAT due may be

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