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Luxembourg Issues Guidance Ahead Of VAT Rate Changes

by Ulrika Lomas,, Brussels

17 October 2014

The Government of Luxembourg has released guidance in a question and answer format in French on the introduction of higher rates of value-added tax (VAT) in the nation from January 1, 2015.

Luxembourg is to hike all rates other than its super reduced rate of VAT by two percent, establishing a headline rate of 17 percent and reduced rates of 8 and 14 percent.

The rate of the super reduced rate is to be unchanged at 3 percent but its scope will change. The supply of alcohol and alcoholic beverages sold by pubs and restaurants will newly be subject to the 17 percent headline VAT rate, along with supplies of housing to third parties as a primary residence.

The guidance discusses transitional rules and the treatment of supplies straddling January 1, 2015. On certain conditions, supplies of goods and services by domestic businesses to the domestic market will be subject to the tax rate in force at that time when a full down-payment is made in advance, even if the delivery of the goods or services takes place after January 1, 2015.

This is in contrast to general rules, otherwise in place, for domestic supplies that the taxable event occurs at the time goods are delivered or services are rendered, and at the rate in place at that time. This is the case regardless of the date on which the goods or services are ordered, the guidance says.

From January 1, 2015, the super reduced rate of value-added tax, of 3 percent, will only apply to work done on a person's own primary residence and not to housing for third parties. Transitional rules will apply for projects notified before January 1, 2015, which are completed before December 31, 2016.

TAGS: compliance | VAT rates | VAT tax authority guidance | tax | business | value added tax (VAT) | Luxembourg | tax authority | services | VAT compliance matters

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