Value added tax (VAT) is the most important indirect tax in Luxembourg and the primary source of tax revenue after direct taxes. Any business carrying on an economic activity in the territory — whether a SARL, an SA, a SAS or a self-employed person — must register with the Administration de l’enregistrement, des domaines et de la TVA (AED) and comply with strict filing obligations.

Luxembourg stands out in Europe with its standard rate of 17 %, the lowest in the European Union, and a super-reduced rate of 3 % for essential items (food, housing, healthcare). This fiscal competitiveness is a structural advantage for businesses established in the Grand Duchy, but requires rigorous management of returns and formal obligations.

1. The four VAT rates in Luxembourg

Luxembourg applies four VAT rates, defined by the amended law of 12 February 1979:

Rate	Percentage	Examples
Standard	17 %	General goods and services, consulting, IT, retail
Intermediate	14 %	Securities management, wines and spirits, certain fuels, printed advertising
Reduced	8 %	Gas and electricity, hairdressing, clothing cleaning, certain cultural goods
Super-reduced	3 %	Food, books (print and digital), medicines, housing (construction and renovation), passenger transport

With a standard rate of 17 %, Luxembourg offers the lowest standard VAT rate in the EU, compared to 20 % in France, 21 % in Belgium and Germany (19 %).

2. Registration obligations

2.1. Who must register?

Any person or entity carrying on an economic activity independently must register with the AED before starting operations. There is no minimum turnover threshold for registration. This covers all company formations and liberal professions exercising independently.

2.2. Intra-Community VAT number

Every taxable person registered for VAT receives a Luxembourg intra-Community VAT number (format: LU + 8 digits). This number must appear on all invoices, intra-Community returns and correspondence with the AED.

3. VAT returns: frequency and deadlines

Annual turnover (excl. VAT)	Frequency	Filing deadline
> €620,000	Monthly	15th of the following month
€112,000 – €620,000	Quarterly	15th of the month following the quarter
< €112,000	Annual	1 May of the following year

The annual summary return is mandatory for all taxable persons, regardless of frequency. It must be filed by 1 May of the year following the tax year.

Practical tip: all returns must be filed electronically via the eCDF platform of the Luxembourg tax administration. Paper returns are no longer accepted.

4. Input VAT deduction

Taxable persons may deduct input VAT on purchases used for their taxable activity. The right to deduction arises when the tax becomes chargeable and requires holding a compliant invoice.

Non-deductible items include: vehicle acquisition (except for certain professional uses), entertainment and reception expenses, housing provided free of charge to staff or managers, and goods and services used for exempt transactions.

For mixed activities (taxable and exempt), a pro-rata deduction applies based on the ratio of taxable turnover to total turnover.

5. Intra-Community and cross-border operations

5.1. Intra-Community supplies of goods (B2B)

Supplies between taxable persons in different EU Member States are exempt from Luxembourg VAT (0 % rate). The buyer self-assesses VAT in the destination country. Documentary proof required: transport documents, buyer’s valid intra-Community VAT number, EC Sales List (recapitulative statement).

5.2. B2B services

The general rule is that services are taxable where the customer is established (reverse charge mechanism). The Luxembourg provider invoices without VAT and the customer self-assesses.

5.3. Distance sales to consumers (B2C)

Since 1 July 2021, a €10,000 EU-wide threshold applies. Below this threshold, VAT of the supplier’s country applies. Above it, the One-Stop Shop (OSS) allows declaring and paying VAT in all EU Member States through a single portal.

6. Special regimes

Regime	Conditions	Effect
Small enterprise franchise	Annual turnover < €35,000	Exemption from VAT (no charging or deduction), optional registration
Margin scheme	Second-hand goods, works of art, antiques	VAT on the margin only (difference between sale and purchase price)
Reverse charge (construction)	Subcontracting in construction	Recipient accounts for both output and input VAT

7. Invoicing requirements

Every invoice must include: seller and buyer details with VAT numbers, sequential invoice number, date of issue, description of goods or services, taxable amount per rate, applicable VAT rate(s) and amount(s), and total including VAT. For exempt supplies, the legal basis for exemption must be stated.

Credit notes must reference the original invoice and clearly state the corrected amounts.

8. Penalties and audits

Offence	Penalty
Late or missing return	Tax fine: €250 – €10,000
Late payment of VAT	Interest: 0.6 % per month
Invoicing errors	Fine: €250 – €5,000 per invoice
Deliberate fraud	Criminal fine: up to 5× the evaded VAT
Obstruction of audit	Fine: €500 – €10,000

The AED may conduct unannounced audits covering the current year and the previous five years. Maintaining accurate accounting records and proper documentation is essential.