Luxembourg Extends the VAT Reverse Charge Mechanism

Luxembourg plans to extend the reverse charge mechanism to specific supplies of goods from January 1, 2024. This move aims to combat fraud and align Luxembourg with international standards for tax regulation, using the possibility set by Art. 199a of the EU VAT Directive to introduce a reverse charge mechanism to certain supplies where there is a higher risk of VAT fraud.

The Government has proposed a Law according to which, the following supplies will fall under the extended reverse charge mechanism since January 1, 2024:

• Mobile Telephones: Supplies of mobile telephones will now shift the liability to account for VAT to the customer, except when the net sales amount is lower than EUR 10,000. In such cases, VAT remains the responsibility of the seller.
• Integrated Circuit Devices: This includes microprocessors and central processing units in a state prior to integration into end-user products. Again, the liability for VAT will move to the customer unless the net sales amount is below EUR 10,000.
• Game Consoles, Tablet PCs, and Laptops: These electronic devices will also be subject to the reverse charge mechanism, with the EUR 10,000 threshold.
• Raw and Semi-finished Metals: This category includes precious metals, but only when they are not covered by any special VAT scheme, such as the margin regime for second-hand goods. The reverse charge mechanism applies unless the net sales amount is less than EUR 10,000.

Under the reverse charge mechanism, suppliers of these specified goods will not charge VAT to their customers. Instead, the responsibility for paying the VAT will shift to the recipient, who must include it in their VAT return.

Luxembourg already applies the reverse charge mechanism to the supplies of emission rights, gas, and electricity. With the new extension, this measure will encompass supplies of mobile phones, tablet computers, laptops, game consoles, and integrated circuits.

Currently, the legislative proposal is in the form of draft law and is subject to approval. In any case, based on the VAT Directive provisions, the end date for this special reverse charge scenarios is December 31, 2026.