Reverse Charge in Luxembourg

Reverse charge for non-established companies in Luxembourg

According to art 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses.

Luxembourg has only introduced the reverse charge mechanism on domestic supplies made by non-established companies in the following scenarios:

  • Supplier requirements
    Non-established in Luxembourg.
  • Customer requirements
    Taxable person identified for VAT purposes in Luxembourg.
  • Scope
    Supplies of natural gas, electricity, heat or cold, under certain conditions, via networks.

This is regulated in Art. 61 (4 and 5) in connection with Arts. 14.1.e) and f) and Art. 17.1.b) Luxembourgish VAT Law

Reverse charge on B2B services

Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located.

According to the general B2B rule, any business resident outside Luxembourg supplying services to an Luxembourgish based customer will not charge any VAT and the transaction will be reverse charged by the customer.

There are however a number of exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Luxembourg provided the following conditions are met:

  • Services connected to immoveable property are located where the property is located.
  • Passenger transport services will be located where the transport takes places (apportioned if necessary).
  • Catering services are located where the catering takes place.
  • Short term leasing of means of transport are located where the vehicle put at the disposal of the customer.
  • Access to conferences, fairs and exhibitions is located where the event takes place.

The general rule may also be deviated where the supplier has a permanent establishment in the country of the customer and the PE has intervened in the supply.

Find out more about the rules for B2B services in the EU here

Also, find here, here and here official information by the Luxembourgish tax authorities.

Reverse charge on specific goods and services in Luxembourg

Domestic reverse charge may also apply to certain domestic supplies goods and services made by companies established in Luxembourg:

  • Supplies of CO2 emission allowances.
  • Supplies of electricity or gas certificates (certificates of origin).
  • Supply of mobile telephones, integrated circuit devices, game consoles, tablet PCs, laptops and raw and semi-finished metals (from January 2024): the reverse charge applies unless the net sales amount is less than EUR 10,000.

Find here more information about the liability to pay the tax in Luxembourg.

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