VAT Registration in Luxembourg
VAT Registration in LuxembourgUpdated on Saturday 16th January 2021
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The value added tax – VAT – is an indirect tax imposed by a commercial agent to its clients and customers upon the sale of goods and services. In Luxembourg, the VAT is collected by companies on the final consumer and is then sent in a special account of the tax authorities.
Both companies and individuals are subject to VAT registration in Luxembourg provided that they undertake economic activities. Foreign investors seeking to open companies in Luxembourg must know that VAT registration is an essential step of the company formation process. In 2015, Luxembourg has also brought several changes to the VAT rates. The standard rate is now 17%, while the reduced rates are 14% for several financial services, and 12% for the supply of electricity and gas.
Our law firm in Luxembourg can assist foreign enterprisers to set up companies here. We can also assist companies and sole traders seeking to register for VAT with this procedure, which can be completed during or after the company incorporation process.
Who is required to register for VAT in Luxembourg?
In Luxembourg, the registration for VAT is mandatory for the following entities:
- anyone established in Luxembourg who starts a taxable activity and assumes that its annual turnover will exceed 25,000 EUR annually;
- any entity which is not established or domiciled in Luxembourg, but who performs transactions subject to the Luxembourg VAT, such as occasional services and temporary provision of services related to real estate located in Luxembourg and delivery of goods with installation or assembly in Luxembourg, for which it is liable for the tax;
- any individual or corporate body established in Luxembourg which performs operations which are not qualified for a deduction and the activity is carried out by a taxable person established abroad services for which the customer is liable for the tax;
- any legal entity who makes intra-Community acquisitions of goods, for an annual fee out of more than 10,000 EUR;
- any entity established in Luxembourg which performs operations that do not qualify for deduction and which performs taxable services on the territory of another Member State for which the lessee is a liable tax;
- any person established in Luxembourg, subject to lump-sum taxation and who performs activities in the agricultural and forestry fields and makes deliveries of alcoholic beverages or wood for an annual amount in excess of 10,000 EUR;
- any person established and registered for VAT in another Member State of the European Union who performs activities in Luxembourg to an annual amount in excess of 100,000 euros.
Several exceptions apply to companies and individuals, such as:
- individuals or corporate bodies on an occasional delivery of a new means of transport;
- individuals or corporate bodies with no permanent establishment in Luxembourg and who operate exclusively abroad;
- legal entities with no permanent establishment in the country and who do not realize imports of goods;
- entities with no permanent establishment in the country which carry out taxable transactions for which the purchaser is liable for VAT.
Our attorneys in Luxembourg can offer more information on companies exempt from registering for VAT in this country.
Declaration of the turnover for VAT registration in Luxembourg
As mentioned above, in order to register for VAT in Luxembourg companies and individuals must submit declarations with an estimated turnover in case of voluntary registration and income statements when obtaining a VAT number becomes mandatory.
In the case of voluntary VAT registration, sales information must be filed with the AED. For this purpose, the tax will be payable at the time the supply of services or sale of goods is made, at the time an invoice is issued, at the time a deposit for the payment is made.
Taxable persons who register an annual turnover below 500,000 euros can apply for VAT registration based on their receipts. The tax becomes applicable once a receipt with the full or partial payment of the goods or services has been issued.
Small businesses have the possibility of choosing how to be taxed for the VAT. They can opt for the filing of sales information or receipts.
Our law firm in Luxembourg can help those who want to set up small businesses and VAT registration in the early stages of starting a company.
The VAT number in Luxembourg
VAT registration is quite simple in Luxembourg and the procedure is completed online. Once registered for VAT, a local company will be recognized by the tax authorities in Luxembourg and the EU based on the taxes it pays, the tax exemptions and credits it obtains with the authorities and even on the charges they impose on their customers.
The VAT number is a guarantee that a Luxembourg company is involved in legal business transactions. Our Luxembourg lawyers can help investors setting up companies here to register for VAT purposes.
Obligations of taxable persons related to the VAT
It is important to understand that VAT registration is required for both companies and individuals selling or providing VAT-taxable goods and services. These also have obligations to comply with when it comes to VAT liability. Among these, we mention:
- filing declarations with the Registration Duties, Estates and VAT Authority (AED) with respect to changes or discontinuation of their economic activities;
- making sure invoices that bear their VAT numbers are issued to clients;
- ensuring they archive copies of all issued invoices for 10 years from the date they were issued;
- file the annual VAT returns and pay the taxes attached to the returns;
- maintain proper accounts that will help them ease the relation with the AED.
Individuals making VAT-taxable supplies of goods and services are also required to file summary statements that contain the persons registered for VAT in other EU countries and to whom they have delivered goods and supplied services. Also, all VAT-related operations must appear in the summary statement. An important change to this filing system was implemented starting with the 1st of January 2020, when the declarations and statements must be filed online with the Registration Duties, Estates and VAT Authority in Luxembourg.
Luxembourg companies and individuals who ship or transport goods from Luxembourg to another EU country is also required to maintain a record with the following VAT-taxable operations:
- any work completed on these goods;
- the temporary use of these goods in another EU member state;
- the temporary use of goods for a maximum period of 24 months in another EU state provided that the respective country has a temporary admission regime for exemption of import taxes.
A VAT-taxable person must also declare purchases of goods and services from EU states periodically. The person must also comply with the payment of the related taxes associated with the purchase.
Taxable persons established in non-EU countries are required to submit letters of guarantee and put down deposits which ensure the payment of the taxes with the Luxembourg authorities.
Taxable persons who are exempt from VAT payments have the obligation of informing the AED on their annual turnover for the previous year. The declaration must be filed in writing before March 1st.
Our lawyers in Luxembourg can offer more information on the requirements a taxable person must comply with once he or she registers for VAT. We can also assist foreign citizens residing in Luxembourg to register for the value added tax if they want to engage in commercial activities.
You can also read about VAT registration in Luuxembourg in the scheme below:
What is the timeframe necessary for registration for VAT in Luxembourg?
The registration for VAT must be made within 15 days after the commencement of the activity for the taxable persons who are not exempt from registration or before the first day of the month following that in which the threshold is exceeded.
For the entities which are not subject to VAT but are willing to register the process must be made prior to the completion of the following:
- implementation of services in the territory of another Member State for which only the lessee is liable for the tax;
- acquisitions of goods subject to Luxembourg VAT and receiving services providers established outside the Grand Duchy for which the lessee is liable to pay the VAT.
What is the procedure of VAT registration in Luxembourg?
Before registering for VAT, companies must have a bank account from a foreign or Luxembourg bank. In order to register for VAT, the taxable person must submit a declaration to the competent tax office. For legal entities, the initial registration application must be accompanied by a copy of the incorporation documents in French or German and a copy of the identity card (or passport) of associates name in the constitution and/or managers, directors of the company.
Once registered for VAT, the applicant receives an identification number for VAT composed of a group of identical and unique 8 digits preceded by the letters "LU". The identification number for VAT purposes is used in intra-community operations.
Foreign companies registering for VAT in Luxembourg
Foreign companies can operate in Luxembourg through branch offices and subsidiary companies which are required to register for VAT here. However, branches and subsidiaries of EU-based companies will be allowed to use the VAT numbers obtained in their home countries.
In the case of non-EU companies setting up operations in Luxembourg, the VAT registration will occur under the same regulations imposed for new Luxembourg companies. In this case, the parent company will be required to submit the documents which attest the registration of the Luxembourg-based business.
Even if there is no need to appoint a local agent to act as tax representative in Luxembourg, most foreign companies will appoint one in order to make sure they comply with the EU regulations.
Our lawyers in Luxembourg can help foreign companies seeking to establish operations in this country with the registration of branches and subsidiaries, including obtaining VAT numbers.
Issuing VAT invoices in Luxembourg
All companies or sole traders selling goods or services in Luxembourg must issue invoices which will contain several elements based on which the payment of the VAT is identified. The following elements must appear on an invoice:
- the company’s VAT number;
- the buyer’s VAT number, where applicable;
- the VAT rate applied;
- the total value of the VAT;
- the final price of the good/service with the VAT;
- the currency in which the invoice was issued.
VAT invoices must be issued within a maximum 6 months after the sale of the product or good and must be kept by the company for 10 years.
With a vast experience in tax legislation, our Luxembourg law firm can offer more information on the regulations related to the value added tax.
VAT returns in Luxembourg
Luxembourg companies registered for VAT are required to file tax returns, among which VAT returns, with the tax authorities. VAT returns in Luxembourg must be filed on a quarterly basis, following the calendar below:
- for the first quarter ranging between January and March, the first return must be filed by April 20th;
- for the second quarter ranging between April and June, the VAT return must be filed by July 20th;
- for the third quarter ranging between July and September, the VAT return must be filed by October 20th;
- for the fourth quarter ranging between October and December, the return must be filed by January 20th of the new year.
Companies are also required to file an annual VAT return at the end of the financial year. VAT returns in Luxembourg must be filed electronically.
Our Luxembourg lawyers can offer more information on filing VAT returns.
VAT refunds in Luxembourg
In certain situations, the VAT can be refunded. These situations may appear if the legal entity is not eligible to pay VAT in Luxembourg or if it didn’t have its place of business in Luxembourg in the period of refund. The application for VAT refund must contain a minimum amount of 400 EUR for a period of minimum of three months and not higher than one year or 50 EUR.
The companies from a non-EU country must submit the VAT refund application with the local tax office, but they may not file a claim with an amount lower than 250 EUR and for a period not equal to one year.
Obtaining an EORI number based on VAT registration
One of the greatest advantages of registering for VAT in Luxembourg is the possibility of obtaining an EORI number which allows for intra-community transactions. EORI numbers in Luxembourg are made of the VAT number and must be obtained with the Customs Office.
Foreign companies seeking to enter intra-community trading activities can also apply for an EORI number if their first transaction takes place in Luxembourg. Once obtained, the EORI number is valid in all EU states.
Not long ago, Luxembourg introduced the VAT warehousing regime which provides for special conditions for the payment of the VAT on the import of goods under specific warehousing conditions than customs ones.
The VAT on imported goods can also be postponed under certain conditions.
The current VAT rates in Luxembourg
The value added tax is one of the most important taxes in the Grand Duchy, the country’s economy relying in a high degree on the collection of this levy. The current rates of the VAT are:
- the 17% standard rate which applies to the sale of most goods and services on the territory of Luxembourg;
- a 14% rate which is charged on certain types of beverages, mineral fuels and oils, advertising materials, cleaning products;
- an 8% rate which is levied on clothing and various household goods, natural gas and electricity, works of art, antiques and certain repair activities;
- a 3% rate which is charged on foodstuff, soft drinks, clothes and footwear, pharmaceutical products, admission to cultural events, some royalties;
- a 0% rate which is levied on intra-community and international transport of goods.
What is a VAT non-resident trader?
A VAT non-resident trader refers to foreign companies with different activities in Luxembourg. Foreign import and export enterprises, alongside companies selling or purchasing goods and services, must register for VAT in Luxembourg if the taxable income per year exceeds the EUR 175,000 threshold. If you are a foreign investor who wants to establish the business presence in Luxembourg and register for VAT, you should get in touch with one of our company formation representatives in Luxembourg.
One of our VAT experts will give complete assistance and support for registration. We also invite you to watch our video:
Short facts about the VAT compliance in Luxembourg
A foreign company with operations in Luxembourg must align with the local regulations in terms of invoice recording and processing, bookkeeping, and related aspects. Among these, the following rules need to be observed by company owners:
- All electronic invoices must be authentic and must have the proper signature.
- The VAT details (rate, sum, etc.) need to be comprised of an invoice.
- If currency rates apply, such information needs to contain the correct VAT rate.
- All accounts and records need to be held in a company for at least 7 years.
If received, the refund is paid no later than 10 days from the decision. For complete information, please contact our lawyers in Luxembourg. You can rely on us if you want to open a company in Luxembourg and need to register for VAT. We can also help you obtain an EORI number in Luxembourg.