Value Added Tax (VAT) is a tax on turnover.
VAT payers—who must first register for VAT with the Indirect Tax Authority (Administration de l’enregistrement et des domaines - 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 Indirect Tax Authority, which is in charge of collecting it.
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-EU purchase 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-EU purchase 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.
At present, 4 rates are applicable in Luxembourg:
- a normal rate of 17 % for taxable operations other than those listed below;
- a super-reduced rate of 3% for operations involving goods and services listed in Appendix B to the VAT law;
- a reduced rate of 8% for operations involving goods and services listed in Appendix A to the VAT law and for certain works of art;
- an intermediary rate of 14% for operations pertaining to goods and services listed in Appendix C to the VAT law.
In particular, a taxpayer must:
- file a declaration with the Indirect Tax Authority when commencing, changing or discontinuing their activity, and inform the 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;
- 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 Indirect Tax 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 summary statement listing the persons who are VAT-registered in a different EU Member State, to whom they have:
- delivered goods within the EU;
- 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.
The declarations and summary statement must, in principle, be submitted to the Indirect Tax Authority by electronic file transfer using the eTVA and eCDF systems (mandatory for periods from 2017 onwards for summary 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 intra-EU purchases of goods and services for which the taxable person, as the buyer, is liable for the tax, and must pay the tax due accordingly.
Taxable persons established outside of the European Union may be required by the Indirect Tax 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 Indirect Tax 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 purchases 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 Indirect Tax Authority. In the event of overpayment of the input tax, the taxable person can request a refund.
Payment of tax
The tax must be paid:
- in cash or by cheque at the following address: Administration de l'Enregistrement et des Domaines
1-3, avenue Guillaume
- by wire transfer or direct deposit to the bank account of the Recette Centrale:
Postal cheque account: IBAN LU31 1111 0114 1970 0000
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.
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 Indirect Tax 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 Indirect Tax 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 Indirect Tax 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 Indirect Tax 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 Indirect Tax Authority.