Luxembourg has a business-friendly value-added tax (VAT) system and the lowest standard VAT rate in the EU. Luxembourg VAT includes multiple reduced rates, strict eligibility rules, specific registration thresholds, and compliance obligations that differ depending on where a business is based and how it operates. Below, we’ll explain the Luxembourg VAT rate, registration requirements, compliance rules, and refund processes.

What’s in this article?

• What is the Luxembourg VAT rate?
  
• What are the VAT rates in Luxembourg?
  
• Who needs to register for VAT in Luxembourg?
  
• How does VAT registration in Luxembourg work for nonresident businesses?
  
• What are the VAT compliance and filing requirements in Luxembourg?
  
• How do VAT refunds work in Luxembourg for businesses?
  
• How Stripe Tax can help
  

What is the Luxembourg VAT rate?

The standard VAT rate in Luxembourg is 17%. This is the default rate that applies to goods and services unless a reduced rate explicitly applies. If a product or service doesn’t clearly qualify for a lower rate, expect to charge 17% VAT.

What are the VAT rates in Luxembourg?

Luxembourg uses a multirate VAT system that applies different tax levels depending on what’s being sold and how it’s used. In addition to the standard 17% VAT rate, there are reduced and zero rates, as well as exempt categories that apply to specific goods and services.

14% reduced VAT rate

This rate applies to a narrow set of goods and services. It includes certain alcoholic beverages (e.g., wine), some energy products (e.g., heating oil), certain printed advertising, and specific financial services such as securities management and custody.

8% reduced VAT rate

The 8% rate covers certain everyday services, utilities, and household-related costs. These include electricity, natural gas, liquid petroleum gas, and other energy sources for residential use (e.g., firewood). This rate also applies to domestic cleaning services, minor repairs to items such as shoes and bicycles, hairdressing services, and some cultural or decorative goods. Certain works of art, antiques, and collectors’ items might fall into this tier, depending on how they’re sold and by whom.

3% super-reduced VAT rate

This is one of the lowest VAT rates in the EU. It applies to essential goods and important social services. Many food products, nonalcoholic beverages, books and newspapers (including digital formats), children’s clothing and footwear, hotel accommodations, restaurant and catering services (excluding alcohol), passenger transport, water supply, and many cultural and leisure activities fall into this tier. Many medications and medical equipment also qualify for the 3% rate.

Zero rate

A limited number of transactions are taxed at 0%, mainly to support cross-border trade. These include exports outside the EU, international transport services, and the sale of certain intra-EU supplies to VAT-registered customers. At this tier, VAT is technically applied but charged at 0% so businesses can still reclaim input VAT.

VAT-exempt activities

Some services fall outside the VAT system. Many financial services, insurance, healthcare, and certain public interest activities are exempt, which means no VAT is charged and input VAT is generally unrecoverable.

Who needs to register for VAT in Luxembourg?

Any business that carries out taxable economic activity in Luxembourg must register for VAT, unless it qualifies for the small business exemption. This allows resident businesses with annual taxable turnovers below €50,000 to operate under the VAT exemption regime. They cannot charge VAT or reclaim VAT on expenses and must notify the tax authorities of their exempt status.

Once turnover exceeds €50,000, VAT registration becomes mandatory. Businesses with annual turnovers below the threshold can register voluntarily. They often do so to reclaim VAT on expenses or to satisfy B2B customers who expect VAT invoices.

Companies that provide only VAT-exempt services, such as insurance and certain financial services, generally don’t need to register. Registration might still be required for nontaxable entities and exempt businesses if they exceed EU acquisition thresholds or receive services from abroad that trigger VAT under reverse charge rules (i.e., when the customer rather than the seller is responsible for reporting and paying the VAT).

How does VAT registration in Luxembourg work for nonresident businesses?

Often, a foreign business must register for Luxembourg VAT as soon as it makes its first taxable supply in Luxembourg. The small business exemption applies only to businesses established in Luxembourg and EU businesses that don’t exceed the €50,000 threshold and have total annual turnovers of €100,000 or less in all member states.

A nonresident business must submit an initial VAT registration declaration, usually through Luxembourg’s online portals. Supporting documents typically include proof of business registration in the home country, identification of company directors, and evidence of intended taxable activity in Luxembourg such as contracts and invoices. Once it’s approved, the business receives a Luxembourg VAT number beginning with “LU,” which must be used on invoices and VAT filings.

EU and non-EU businesses are registered under dedicated tax offices that handle foreign traders. Luxembourg doesn’t require nonresident EU businesses to appoint local fiscal representatives. Foreign companies can register and deal directly with the Luxembourg VAT authorities. Businesses established outside the EU might be required to provide a financial guarantee or security deposit. The amount is set by the tax authority and is based on expected taxable activity.

Some cross-border sellers use EU-wide schemes such as the One Stop Shop (OSS), an online VAT payment portal and management system, for certain B2C transactions. If a business performs taxable activity that isn’t covered by these schemes, a direct Luxembourg VAT registration is still required.

What are the VAT compliance and filing requirements in Luxembourg?

After registration, VAT in Luxembourg becomes an ongoing responsibility. The rules are predictable, but they require consistency, accurate records, and attention to deadlines. Here’s how to stay compliant.

Returns and payments

Businesses file VAT returns monthly, quarterly, or annually, depending on annual turnover. Lower-volume businesses can file once a year, midsize businesses typically file quarterly, and higher-volume businesses are required to file monthly.

VAT owed must be paid by the applicable deadline, even if an administrative filing extension applies. Late registration, late filing, or underpayment of VAT can result in financial penalties and interest charges. All VAT returns and related declarations must be filed electronically through Luxembourg’s official online systems. Paper filings aren’t accepted. Serious or repeated failures might lead to audits or enforcement actions.

Businesses that make intra-EU supplies might need to submit EC Sales Lists, and those that exceed statistical thresholds must file Intrastat reports for the movement of goods within the EU.

Invoicing

VAT invoices must include specific information such as the supplier’s Luxembourg VAT number, the customer’s details, a unique invoice number, the taxable amount, the VAT rate applied, and the VAT charged. Without a valid invoice, input VAT cannot be reclaimed.

Recordkeeping and reporting

Businesses must retain VAT records, including invoices and supporting documentation, for at least 10 years. Records can be stored electronically, but they must remain accessible to the tax authorities.

How do VAT refunds work in Luxembourg for businesses?

The refund process depends on whether the business is registered for VAT in Luxembourg or simply incurred VAT there. There are three main refund categories.

Luxembourg-registered businesses

When input VAT exceeds output VAT, the excess can be reclaimed through the VAT return. Businesses can request a refund rather than carry the credit forward. Refunds are typically paid within a few months if the claim is supported by valid invoices.

EU-based unregistered businesses

Businesses established in another EU country can reclaim Luxembourg VAT through the EU VAT refund system. Claims are submitted via the home country’s tax portal and must generally be filed by September 30 of the following year, subject to minimum claim thresholds.

Non-EU businesses

Non-EU companies can also reclaim Luxembourg VAT under a separate refund procedure. Luxembourg doesn’t apply reciprocity rules, so refunds are available regardless of the claimant’s home country, provided the eligibility conditions are met.

In general, refunds are usually available only if the business wasn’t required to register for VAT in Luxembourg during the claim period. If registration was required, VAT must be recovered through local VAT returns instead. Claims must be supported by compliant invoices and might be reviewed by the tax authority before payment. Missing documentation or unrecoverable expenses could result in partial or full rejection.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and goods and services tax (GST) on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

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