VAT registrations and simplifications in Luxembourg

When do I need a Luxembourgish VAT number?

Generally, a foreign business must register for VAT (Value Added Tax) in Luxembourg as soon as a taxable supply is made. The following are the usual examples of taxable transactions: 

  • Domestic supply of goods not reverse charged: A supply of goods located in Luxembourg where the reverse charge does not apply requires a VAT registration of the supplier. 
  • Supply of services not reverse charged: Foreign non-established businesses supplying services on which Luxembourgish VAT is due by the supplier must register for VAT. These services are rather exceptional, as the general B2B rule would apply. 
  • Imports of goods in Luxembourg: when a non-established trader imports goods under his or her own name, a VAT registration is required in the country.  
  • Export: Exporting goods to a non-EU country requires a VAT number before the export is made. 
  • Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT. 
  • Intra-Community supply: Supplying goods another Member State is also a taxable transaction that obliges the supplier to register for VAT.   
  • Distance sales: When applicable in case the Seller has not joined OSS. See the E-commerce manual for more information. 

Non-established companies must apply for VAT registration before performing any of the above taxable transactions. There is no turnover threshold applicable to non-established companies.  

Luxembourgish established companies can benefit from a VAT registration exemption threshold of EUR 35,000 (annual turnover during a calendar year excluding tax). However, these businesses must inform the tax administration about the annual turnover realized during the previous calendar year. Also, in case they perform any intra-Community transaction they become liable to file an electronic VAT return. Established entities can opt for a voluntary VAT registration. 

Backdated registrations are allowed in Luxembourg. You will need to regularize past reporting periods as from the registration date.  

Check here the official information about VAT registrations in Luxembourg.

Find here the VAT registration form, or initial declaration form, for download.

Fiscal representative requirements in Luxembourg

Some countries require all non-EU companies to appoint a fiscal representative when registering for VAT. However, this requirement does not apply in Luxembourg.

In any case, non-EU based businesses registering for VAT in the country must consider that, upon registration, the tax office may require a bank guarantee to ensure the payment of the VAT and eventual penalties connected to the taxable activity in the country.

The bank guarantee requirement is regulated under Art. 66 of the Luxembourgish VAT Law.

VAT groups in Luxembourg

VAT grouping is possible for businesses established in Luxembourg. Group members must be closely bound by financial, economic, and organizational links, so they may form a VAT group and be treated as a single taxable person for VAT purposes.

In addition, the following VAT grouping rules apply in Luxembourg:

  • Only Luxembourgish established businesses and local branches of foreign companies can be part of a VAT group.
  • Intra-group transactions are disregarded for VAT purposes.
  • Every group member is jointly and severally liable for the VAT debts and penalties of the entire group.
  • One of the members of the group is established as the group representative. This member becomes responsible for dealing with all VAT requirements for the whole group: including the submission of consolidated VAT returns and making VAT payments.
  • The VAT group must operate for at least two calendar years.

Find here additional information about VAT groups in Luxembourg. VAT group regime is regulated under Art. 60.ter VAT Act.

Consignment and Call-off stock in Luxembourg

The EU introduced a call-off stock simplification that all EU Member States must implement. This was put into place so that businesses that operate under a consignment stock structure do not have to VAT register in the country of destination. Luxembourg has introduced the consignment stock simplification.

 Check out our article on the EU call-off stock simplified VAT rules for more detailed information

Luxembourgish Bad Debt Relief

Bad debt refers to an unpaid invoice for which the Supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer. This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.

Bad debt relief refers to the possibility of recovering the VAT from that invoice. Luxembourg allows for bad debt relief when it can be reasonably expected that the customer will not pay the invoice.

The supplier must adjust the input VAT on the amount of the bad debt within 2 years since the VAT was due.

Luxembourgish Import Deferral and Postponed VAT Accounting

Luxembourg has introduced a postponed import VAT accounting mechanism where import VAT can be reported as input and output VAT (reverse charged) in the VAT return instead of being paid to the authorities upon importation. Postponed import VAT accounting applies automatically provided that the importer is VAT registered in Luxembourg. Taxpayers do not need to file a separate application.

In case the importer is not VAT registered in the country, then import VAT will be collected by Customs.

Import VAT deferral, meaning delaying the payment of VAT for a given period, is not applicable in Luxembourg.

Find here more information about postponed import VAT accounting in Luxembourg.

Have a look at our general article about postponed import VAT accounting.

Luxembourgish Customs and VAT warehouses

Customs or bonded warehouses are available for goods that have not cleared customs in the EU (T1). VAT and excise duties are not due when these goods are directly placed in the Customs warehouse. As soon as they exit this regime, these amounts are due. Sales within the customs warehouse are zero-rated. Luxembourg has available customs warehouses as well as other customs storage.

VAT warehouses are available for cleared goods (T2). These goods have already paid customs duties. The conditions are similar to those of Customs warehouses. The goods allowed are those included in Appendix V of the VAT Directive. Luxembourg has not implemented this particular option.

Read more about Customs warehouses in Luxembourg. Also check here the different storage and temporary storage options in Luxembourg. Finally, find here official EU guidelines on Customs’ special regimes.

Special VAT Schemes in Luxembourg

Businesses may benefit from the following special VAT regimes:

  1. Small businesses: this is a VAT exemption scheme that applies to established companies with a turnover (exclusive of VAT) not exceeding EUR 35,000 in the previous calendar year, or in the current tax year. The businesses under small business scheme do not need to charge VAT on their supplies, however, they need to declare their annual turnover every year. These businesses are not entitled to input VAT deduction. Find more information here.
  2. Farmers.
  3. Travel agents.
  4. Margin scheme.
  5. Cash accounting. Find more information here, under the section Declaration of turnover based on receipts.

Have a look at our website articles about TOMS and the Cash accounting scheme.

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