Luxembourg VAT rates update as of January 1, 2024

Luxembourg, a small country in the center of Europe, has attracted e-commerce attention for years thanks to its friendly tax regulations. In 2024, there was a return to the previously applicable rate, which was temporarily reduced in 2023. Despite this increase, Luxembourg remains the country with the lowest basic VAT rate in the entire European Union. In this article, we will discuss in detail how much Luxembourg’s new VAT rates are and what they entail.

Luxembourg VAT rates: Back to pre-reduction levels

Luxembourg has one standard VAT rate and four reduced rates. A temporary reduction in VAT rates was introduced in 2023 to mitigate the effects of inflation. This temporary reduction of 1 percentage point applied to the standard VAT rate and two reduced rates, which were 16%, 13% and 7%, respectively. As of January 1, 2024, VAT rates returned to their pre-reduction levels:

• 17% – the standard VAT rate in Luxembourg, applies to all products and services not covered by reduced rates: 14%, 8%, 3% and 0%.
• 14% – First reduced VAT rate.
• 8% – Second reduced VAT rate.
• 3% – Super reduced VAT rate.
• 0% – Zero VAT rate.

Reduced VAT rates

The first of the reduced VAT rates (14%) applicable in Luxembourg includes:

• Selected types of wine,
• Solid fossil fuels,
• Mineral oils,
• Laundry and cleaning supplies,
• Printed advertising materials.

The 8% VAT rate in Luxembourg applies to:

• Household cleaning services,
• Minor repairs,
• Hairdressing services,
• District heating,
• Natural gas, electricity, firewood, LPG,
• Cut flowers and decorative plants,
• Selected works of art and antiques.

Luxembourg also has a super reduced VAT rate of 3%, which applies to:

• Food products,
• Children’s articles,
• Books, e-books and magazines,
• Tickets to cultural events,
• Agricultural articles (excluding pesticides),
• Selected pharmaceutical products,
• Medical equipment for the disabled.

The 0% VAT rate in Luxembourg applies to intra-Community and international transportation.

Find out more about VAT LU on our website: Luxembourg VAT – The Rates & Registration.

Waiting time to obtain a VAT LU number

It usually takes 3 to 4 weeks to get a VAT number in Luxembourg. However, it is advisable to register for VAT before starting any transactions in Luxembourg to avoid possible penalties and interest for late payment of VAT to the tax office.

VAT LU declaration deadlines

In Luxembourg, the rhythm for filing VAT returns can vary depending on the value of turnover:

• Monthly (for turnover above 620,000 euros)
• Quarterly (for turnover above €112,000 but below €620,000)
• Annual (for turnover up to 112,000 euros)

The choice of the filing rhythm depends on the turnover made using a Luxembourg VAT number. This is decided by the Luxembourg tax office and informed at the time of VAT registration. If the value of sales transactions made changes during the year, the administration may change the reporting rhythm.

The deadlines for submitting LU VAT returns are as follows:

• Monthly declarations: by 15 days after the end of each accounting month.
• Quarterly declarations: by 15 days after the end of the accounting quarter.
• Mandatory annual VAT return: by May 1 of the year following the accounting period.

Reverse charge mechanism – VAT Luxembourg

In Luxembourg, the reverse charge mechanism is a way of transferring responsibility for VAT settlement from the seller to the buyer, mainly in B2B transactions. So far, it has mainly been applied to sectors such as emissions rights, gas, and electricity, but as of January 1, 2024, reverse debit also applies to other goods, such as cell phones, tablets and laptops. The sales value threshold for this mechanism to apply has been set at €10,000 net.

Consequences of failure to comply with tax obligations

Failure to comply with tax obligations in Luxembourg carries severe consequences. Any business, regardless of its location, can face financial penalties for late payment of VAT or for failure to file a return by the deadline. These penalties can be as high as 10% to 50% of the VAT due annually, and in addition, the administration can impose interest of 7.2% per year. Failure to file a return by the deadline can result in a penalty of between €250 and €10,000, depending on the severity of the offense.

Required data on the Luxembourg VAT invoice

Required data on the VAT invoice include:

• invoice number,
• details of the seller and the buyer,
• the dates of issuance of the document and delivery of the goods,
• VAT rates applied in the transaction,
• detailed information about the goods and services, including description, quantity, weight, net, VAT and gross amounts,
• the currency in which the invoice was issued.

Summary

For e-commerce entrepreneurs, knowing the current VAT rates in Luxembourg is crucial. Despite a return to previous rates from January 2024, Luxembourg still offers the lowest standard VAT rate in the EU. Understanding the differences between tax rates can help you stay competitive in the market. That’s why regular monitoring of tax changes is important for e-commerce success in Luxembourg. We encourage you to consult with experts to avoid confusion and ensure compliance with current regulations: Contact us – amavat ®.

With amavat ®, you can focus on running your e-commerce business, confident that all accounting and tax matters will be properly taken care of. Our knowledge and experience allow you to take care of your finances, giving you peace of mind and time to do what you do best – grow your business!

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