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Luxembourg: VAT Update

VAT rates increase

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Christophe Plainchamp


Nicolas Devillers

As expected, all Luxembourg VAT rates will be increased by two percentage points in the coming months with the exception of the super-reduced rate which will remain at 3%. In any case, the new Luxembourg standard VAT rate (17%) will remain the lowest within the EU. Even if initially planned for January 1 2015, the implementation date has not been yet confirmed: Finance Minister Gramegna mentioned recently that the increase would either take place this summer (most likely) or in January 2015.

2015 VAT changes for electronic, telecommunication and broadcasting services

By the end of 2013, the Council of the EU published its Implementing Regulation (1042/2013) dealing notably with new rules applicable to the place of supply of telecommunication services, television and radio broadcasting services and electronically supplied services (ICT services) supplied by EU businesses to EU private customers.

Until now, when supplied by an EU service provider, the place of taxation of ICT services was the place of establishment of the service provider. From January 1 2015, the place of taxation will become the member state where the customer is established, his permanent address or his habitual residence. In Luxembourg, the Bill No. 6642 implementing these rules is in the course of approval and should be adopted in the coming months.

Businesses concerned are European providers of telecommunication services, television and radio broadcasting services and electronically supplied services.

Businesses affected by these new rules will be required to charge the respective VAT rate in effect in the member state where their customers are established. As the VAT rates vary from 3% to 27% within the EU, IT systems will have to be adapted to apply the correct rate based on the country of establishment of the customer. Invoices will also have to comply with local requirements.

Fortunately, businesses will not suffer an important administrative burden in all EU member states (for example VAT registration, VAT returns, VAT payments) as a specific scheme, the mini one-stop shop, has been designed to allow ICT service providers to file one single VAT return per quarter, including the VAT due in each respective member state.

These changes raise however issues, such as:

  • Defining accurately the place of establishment of the customer and the related VAT liability;

  • The pricing effect on the final customer;

  • Privacy issues about data collected on customer and the storage of such information; and

  • Invoicing requirements.

More member states to apply reduced VAT rates to e-books

In 2013, the European Commission referred France and Luxembourg to the European Court of Justice (ECJ) for applying a reduced VAT rate to e-books.

The battle may however not be lost as another case implicating Finland is pending at the ECJ to clarify the difference in treatment regarding the VAT rates applicable on books, depending on whether they have been supplied under an electronic-format or a hard-format. Besides, in a recent press release, the German Ministry of Culture has notified his intention to also apply a reduced rate on e-books. We will update you on future developments on this topic.

Christophe Plainchamp (christophe.plainchamp@atoz.lu) and Nicolas Devillers (nicolas.devillers@atoz.lu)

ATOZ – Taxand

Tel: +352 269 401

Fax: +352 269 40 300

Website: www.atoz.lu

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