VAT - Delivery of goods

Any transaction involving the transfer of ownership of a tangible good constitutes a delivery 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 delivery of goods.

The delivery of a good is subject to value added tax (VAT) in Luxembourg if the delivery 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

Deliveries of goods are in principle taxable in Luxembourg if they 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.

Examples:

  • 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 covers mail order sales and, generally, all sales involving goods which are shipped or transported by the seller to a private consumer not subject to VAT based in a Member State of the European Union.

Distance selling to consumers residing in another Member State of the European Union is fully taxable in that other Member State once the supplier's annual sales in said State exceeds a certain limit set by that State (between EUR 35,000 and EUR 100,000 depending on the Member State in question).

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.

Examples:

  • in 2006 a Luxembourg business carries out distance selling to France amounting to a total of EUR 50,000. The same business makes a sale in 2007 amounting to EUR 18,000 and then a second sale amounting to EUR 12,000. Since the limit in France is set at EUR 100,000, it has not been exceeded and these sales are subject to Luxembourg VAT, unless of course the business has opted for immediate taxation in France, in which case French VAT should apply to all sales made.
  • if, on the other hand, the same business had already made sales amounting to EUR 80,000 in France in 2006, the first sale of EUR 18,000 would still be subject to Luxembourg VAT, unless the business had opted for taxation in France, but French VAT would apply to the whole of the second sale of EUR 12,000 as well as to all subsequent sales given that this last sale made the business exceed the legal limit of EUR 100,000.

In practice

Delivery 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 provision 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 his VAT return.

Delivery of goods to private individuals

For 'distance selling' (mail order sales) to private individuals or persons benefiting from derogations, the VAT applicable depends in particular on the amount of sales in the destination country:

  • the seller is established in Luxembourg and the total amount of annual sales of goods in the country of destination exceeds the limit set by the Member State of destination (between EUR 35,000 and EUR 100,000).
    => VAT is applicable in the country of destination;
  • the seller is established in Luxembourg and the total amount of annual sales of goods in the country of destination is lower than the limit set by the Member State of destination (between EUR 35,000 and EUR 100,000).
    => taxation takes place in Luxembourg.
  • the seller is based in another EU country and the amount of its annual sales to Luxembourg exceeds EUR 100,000 net of tax over the calendar year
    => taxation takes place in Luxembourg.

Special cases: delivery to private customers of new cars (less than 6,000km or less than 6 months old) or goods subject to excise duties is exempt from VAT in the EU country of departure and is instead taxed in the EU destination country.

Summary

A supplier based in Luxembourg that ships goods to the customer from Luxembourg will be subject to the following regime:

Shipment from Luxembourg

 

Taxable customer established in the EU

Non-taxable customer established in the EU

Importer established outside the EU

Supplier's turnover in the customer's country of establishment
> limit (between EUR 35,000 and EUR 100,000)

Exemption from VAT in Luxembourg (1)
-
VAT of the customer’s Member State

VAT of the customer’s Member State

Exemption from VAT in Luxembourg 2

Possible VAT in the country of destination

Supplier's turnover in the customer's country of establishment
< limit (between EUR 35,000 and EUR 100,000)

Exemption from VAT in Luxembourg (1)-

VAT of the customer’s Member State

Luxembourg VAT

- unless opted otherwise (3)

Exemption from VAT in Luxembourg 2

Possible VAT in the country of destination

(1) Luxembourg VAT is indeed applicable, but the law provides for the exemption of deliveries of goods to taxable persons based within the EU (exemption of intra-Community deliveries).

(2) Luxembourg VAT is indeed applicable, but the law provides for the exemption of exports of goods to non-EU countries, whether or not the buyer is liable for VAT in his country of residence.

(3) The VAT of the buyer's Member State is applicable if the supplier has opted for immediate taxation in that Member State.

A supplier based in another Member State that ships its goods to Luxembourg from that country will be subject to the following regime:

Shipment from Member State X

 

Taxable customer based in Luxembourg

Non-taxable customer based in Luxembourg

Supplier turnover in Luxembourg
> EUR 100,000

Exemption from VAT of Member State X (1)

Luxembourg VAT

Luxembourg VAT

Supplier turnover in Luxembourg
< EUR 100,000

Exemption from VAT of Member State X (1)

Luxembourg VAT

VAT of Member State X

- unless opted otherwise (2) -

(1) The VAT of Member State X is indeed applicable, but the law provides for the exemption of deliveries of goods to taxable persons based within the EU (exemption of intra-Community deliveries).

(2) Luxembourg VAT is applicable if the supplier opted for immediate taxation in that Member State.

Foreign businesses carrying out transactions in Luxembourg do not escape payment of VAT. They can apply for the reimbursement of VAT paid when purchasing goods in Luxembourg when they do not carry out any taxable transactions:

 

Taxable customer based in Luxembourg

Non-taxable customer based in Luxembourg

Import from non-EU country Y

Luxembourg VAT

Luxembourg VAT

Obligations for declaring VAT

The obligations are the result of the lack of control and declaration obligations when crossing EU borders.

Businesses liable for VAT must:

  • have a European VAT number which will appear on all invoices to EU countries;
  • issue invoices including for the payment of deposits where applicable;
  • include an 'intra-Community acquisition' or 'intra-Community delivery' item, as applicable, in the accounts;
  • state the amount of intra-Community transactions on VAT returns and pay VAT on intra-Community acquisitions.
  • submit summary statements with regard to intra-Community delivery of goods.