Luxembourg is home to some 682,000 people and more than 45,000 businesses. Despite being one of the smaller members of the European Union, the grand duchy is an attractive market for German businesses, with many potential customers and business partners. But when selling internationally, they need to consider more than market opportunities. They also need to think about value-added tax (VAT). Invoicing rules differ depending on whether a business supplies goods or services and if it sells to another business or to a consumer.

In this article, you’ll learn when German businesses have to indicate VAT on invoices to Luxembourg and what the differences are between business-to-business (B2B) and business-to-consumer (B2C) sales. We’ll also explain the role of the One Stop Shop (OSS) and how you can automate your invoicing.

Key takeaways

• The VAT shown on an invoice to Luxembourg depends on the type of supply and whether the customer is a business or a consumer.
  
• B2B supplies of goods could qualify as zero-rated intracommunity supplies of goods, while supplies of services are often subject to the reverse charge procedure.
  
• B2C supplies of goods generally fall under the destination principle, meaning that VAT might be due in the country where the private customer is located.
  
• Certain cross-border B2C sales are subject to an EU-wide €10,000 revenue threshold. The scope covers intracommunity distance sales and specified services.
  
• The OSS allows German businesses to report and remit any VAT due in Luxembourg on certain cross-border B2C sales via the Federal Central Tax Office (BZSt).
  

When must invoices to Luxembourg include VAT?

German and EU VAT law specifies when an invoice to Luxembourg must include VAT. The main criteria are the nature of the supply, the place of supply, and whether the buyer is a business or a consumer.

Businesses (B2B) vs. consumers (B2C)

German VAT often does not apply to international supplies of services between businesses within the EU. Supplies of goods could qualify as zero-rated intracommunity supplies. In contrast, the place of supply for many B2B services is the headquarters of the Luxembourgish business, so the reverse charge procedure applies. Other types of supplies might be subject to special additional rules on taxation and place of supply.

Invoices to consumers, by contrast, typically include German or Luxembourgish VAT. The applicable rate depends, among other things, on if the seller supplies goods or performs services and where the sale is taxable. Some supplies fall under specific EU regulations.

Supplies of goods vs. supplies of services

VAT treatment depends on both the type of buyer and the nature of the supply. Regulations differ for goods and services. Some services are also subject to special VAT rules. These include electronic services or works related to real estate. Therefore, German businesses need to check which rules apply in each case before invoicing.

Things to remember when invoicing businesses in Luxembourg

The first thing to remember when invoicing a business in Luxembourg from Germany is that each invoice must contain all mandatory details stipulated by Section 14, Paragraph 4 of the German VAT Act (UStG). That includes, in particular:

• Full name and address of the company supplying the goods or service
  
• Full name and address of the recipient of the product or service
  
• Issue date of the invoice
  
• Date of delivery or other supply (i.e., the performance period)
  
• The tax ID issued to the seller by the tax office or the VAT identification number (VAT ID) issued by the BZSt
  
• Sequential, unique invoice number
  
• Quantity and type of items delivered or scope and type of service rendered
  
• Fee (net)
  
• Applicable tax rate and the amount of tax due
  

Cross-border B2B transactions within the EU often require additional information. For example, invoices for intracommunity sales must indicate the VAT ID of both the German seller and the Luxembourgish buyer. Additionally, if no German VAT is charged, the invoice requires a note to that effect.

Zero rating for intracommunity supplies of goods

A cross-border supply of goods and products between EU businesses is known as an intracommunity supply of goods. Pursuant to Section 4, No. 1 of the UStG, together with Section 6a of the UStG, intracommunity supplies of goods are zero-rated, i.e., exempt from VAT. This means German businesses do not have to show German VAT when invoicing a business in Luxembourg for deliveries of goods.

To qualify for zero rating, the goods must physically enter Luxembourg and the recipient must have a valid VAT ID.

Reverse charge on services

German businesses also do not need to show German VAT on invoices for services performed for businesses in Luxembourg. According to Section 3a, Paragraph 2 of the UStG, the location-of-recipient principle governs supplies of services to businesses within the EU. Under this provision, the place of supply is where the buyer conducts its business.

In these situations, the reverse charge procedure is used. This means the Luxembourgish buyer, rather than the German seller, is responsible for paying the VAT. Accordingly, the invoice does not indicate German VAT. Instead, it must include the legally required note regarding the reversal of tax liability: “Steuerschuldnerschaft des Leistungsempfängers” (in English: “Reverse charge applies”).

Some exceptions apply. Sections 3a to 3g of the UStG contain special provisions on determining the place of supply for certain services. Examples include services relating to real estate, passenger transport services, cultural or sporting events, and short-term vehicle rentals.

Things to remember when invoicing consumers in Luxembourg

Generally, issuing invoices is less compulsory for B2C sales than for B2B sales. The type of sale and applicable invoicing requirements determine if an invoice is required and what information it must contain. As a rule, EU law does not require invoicing for intracommunity distance sales that are declared via the EU’s OSS. For invoiced sales, then corresponding invoices must contain the mandatory details stipulated by Section 14, Paragraph 4 of the UStG. Here, too, the nature and place of supply determine what VAT needs to be included on the invoice.

Intracommunity distance sales

If a German business ships goods to a consumer in Luxembourg, this might constitute an intracommunity distance sale within the meaning of Section 3c, Paragraph 1 of the UStG. As a rule, these transactions are subject to the destination principle. The place of supply is, therefore, the place where the goods are located once delivery or shipping ends.

For instance, if goods are shipped from Germany to a consumer in Luxembourg, the sale is taxable in Luxembourg according to the destination principle. In this case, the German business is required to charge Luxembourgish VAT. Pursuant to Section 18j of the UStG, businesses can use the OSS to handle VAT on these supplies, provided they meet the statutory eligibility criteria.

Services performed for consumers

Different rules apply when performing services for consumers. The first criterion for determining the place of supply is the type of service. Many services provided to consumers fall under the general provisions of Section 3a of the UStG. Under these provisions, the place of supply is generally the seller’s location, meaning German VAT applies to services performed by German businesses.

By contrast, Section 3a of the UStG contains specific rules for some services, particularly telecommunications, radio, and television, and any additional services provided electronically under Section 3a, Paragraph 5 of the UStG. For such services, the place of supply is generally where the consumer resides or has their usual residence. Because of this, if a German business renders one of these services for a consumer in Luxembourg, Luxembourgish VAT could be due.

The €10,000 revenue threshold

German VAT law provides for a simplification for certain international sales to consumers within the EU. According to Section 3c, Paragraph 4 of the UStG and Section 3a, Paragraph 5 of the UStG, an EU-wide threshold of €10,000 applies. The limit does not apply solely to revenue generated with consumers in Luxembourg. Instead, it refers to the total generated from relevant intracommunity distance sales and specified cross-border services provided for consumers in other EU member states.

In principle, corresponding sales remain taxable in the state where the business is headquartered, as long as total sales do not exceed €10,000 in either the preceding or current calendar year. In this case, German VAT remains applicable when shipping goods to Luxembourg. This simplification is unavailable if a business exceeds the €10,000 limit. Above that amount, the destination principle would apply to intracommunity distance sales. For the services listed in Section 3a, Paragraph 5 of the UStG, the place of supply is also the consumer’s usual residence.

German businesses can opt out of the €10,000 threshold. If they do, they must tax those transactions directly under the destination country’s regulations or the applicable place-of-supply rules. The election is binding for at least two calendar years.

How does the OSS work for sales to Luxembourg?

Under Section 18j of the UStG, the OSS makes it easier for German businesses to remit VAT due on qualifying international sales to consumers in other EU member states. Instead of registering for VAT separately in each member state, businesses can declare and remit VAT on relevant sales centrally through the BZSt.

For supplies of goods and certain services to consumers in Luxembourg, the OSS might be particularly useful for businesses that exceed the €10,000 threshold and are thus liable for Luxembourgish VAT. These businesses can then issue invoices including Luxembourgish VAT and report the corresponding sales via the OSS.

That said, the OSS is not a substitute for a thorough review of where VAT is actually due. Businesses first need to determine where their transaction is taxable according to the applicable rules on taxation and place of supply. After that, they can determine if any VAT owed is reportable through the OSS.

How Stripe Invoicing can help

Stripe Invoicing simplifies your accounts receivable (AR) process—from invoice creation to payment collection. Whether you’re managing one-time or recurring billing, Stripe helps businesses get paid faster and streamline operations:

• Automate accounts receivable: Easily create, customize, and send professional invoices—no coding required. Stripe automatically tracks invoice status, sends payment reminders, and processes refunds, helping you stay on top of your cash flow.

• Accelerate cash flow: Reduce days sales outstanding (DSO) and get paid faster with integrated global payments, automatic reminders, and AI-powered dunning tools that help you recover more revenue.

• Enhance the customer experience: Deliver a modern payment experience with support for 25+ languages, 135+ currencies, and 100+ payment methods. Invoices are easy to access and pay through a self-serve customer portal.

• Reduce back-office workload: Generate invoices in minutes and reduce time spent on collections through automatic reminders and a Stripe-hosted invoice payment page.

• Integrate with your existing systems: Stripe Invoicing integrates with popular accounting and enterprise resource planning (ERP) software, helping you keep systems in sync and reduce manual data entry.

Learn more about how Stripe can simplify your accounts receivable process, or get started today.

FAQs about invoicing Luxembourg