Luxembourg entities, whether incorporated or not, are typically obliged to register for VAT if they engage in activities subject to VAT. However, those exclusively involved in VAT-exempt activities are exempt from registration, unless they are liable to self-assess VAT on goods or services obtained internationally.

Entities in Luxembourg subject to VAT, and not qualifying for exemption, can offset the VAT they owe by the amount charged by their suppliers or self-assessed on imported goods or services.

From January 1, 2023, to December 31, 2023, the Luxembourg government temporarily reduced some VAT rates by 1 percentage point (shown in parentheses below).

The standard VAT rate in Luxembourg is 17% (16%) for goods and services deemed to occur within Luxembourg. Lower rates apply as follows:

– 14% (13%) for specific items like wine, advertising pamphlets, and securities management.
– 8% (7%) for gas or electricity supply.
– 3% for food, non-alcoholic beverages, pharmaceuticals, books, e-books, most broadcasting services, footwear, accessories, and certain children’s clothing.

Banking, financial, insurance, fund management, and reinsurance transactions are typically VAT exempt in Luxembourg. However, services directly linked to VAT-exempt activities can’t be refunded, except when provided to entities outside the EU.

Multiple Luxembourg entities may choose VAT grouping, allowing them to function as a single VAT entity. Transactions within the VAT group are disregarded for VAT purposes, and only the group submits VAT returns.