Luxembourg 2015 VAT Increase

In April of this year Luxembourg’s Prime Minister, Xavier Bettel, confirmed that the country’s VAT rate would increase by 2% across three of its tax bands.

The start of 2015 will see a hike in all of Luxembourg’s tax rates, other than its super-reduced rate which will remain at its current 3% level. This increases all other levels as follows:
• Standard rate rises from 15% to 17%
• Reduced rates will rise from 12% to 14% and from 6% to 8%.

VAT calculator

The higher rates are expected to generate around an additional €350million for the country, and is a necessary cost in order to offset the anticipated deficit as a result of earlier tax amendments. We discussed these specific changes in a previous article, which references the tax changes towards supply rules for telecommunications, broadcasting and electronic services, which will also take effect on 1 January 2015. Read more in our article:

Are you ready for the EU’s vat changes of 2015?

The new legislation comes as part of Bettel’s annual ‘State of the Nation’ address which announced that Luxembourg will be financially reformed by 2017. However, the new legislation towards digital services means that Luxembourg is estimated to lose a staggering 70% of its revenue as a result of increased costs.

Companies like Amazon are based in Luxembourg because we are business friendly and we offer them a great gateway into the EU and excellent talent . . . the VAT tax regime on ebooks is not going to be a game-changer.

Tax professionals within Luxembourg, or those that represent companies which operate within Luxembourg, need to be aware of these changes and how these will affect the business in terms of the cost of their suppliers and costs for customers.

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