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Low VAT in Luxembourg

Updated on Thursday 14th April 2016

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VAt_in_luxembourg.jpgLuxembourg is a very attractive country for investors due to the stability of the economy and the lowest standard VAT rate in European Union (15%). This country offers many advantages to foreign investors who decide to open a company in this country due to a financial environment that encourages doing business. Indirect taxes and a low VAT rate are two good reasons for setting up a company in Luxembourg.

For many years, Luxembourg has the lowest VAT rates in EU, beginning from 3% and no more than 15%.  A very low VAT rate is applied to domestic supplies, so the country is chosen by businessmen who sell electronic and telecommunication goods and services. The companies that offer e-services and are established outside EU have to pay the VAT on each service offered to a European client at the rate from the customer’s country of residence.  This can be a problem for investors and the solution they have is to provide these e-services from Luxembourg, after they establish an office in this country.
 

What products and services have the lowest VAT rate

The lowest VAT rate (3%) is applied to the providers of TV and radio broadcasting services. At the sale of e-books was applied the same lowest VAT rate, but the European Commission said in 2012 that this is against the EU rules, that stipulates that authorities in EU contries can reduce VAT rates at some goods and services, such as books, but not e-books. France has the same problem when imposed a VAT rate of 7% for e-books.

The lowest VAT rate (3%) is applied also for food, pharmaceuticals, newspapers, sporting events etc. For certain services, such as insurance, financial, real estate, postal or education, there is an exempt from paying the VAT.

What happens starting 2015?

The low VAT rate won’t last too much, since the prime minister of Luxembourg, Claude Junker, said there will be an increase VAT rates starting 2015, when is expected to raise to 17%. This measure is taken in order to counterbalance the loss of VAT revenues in e-commerce. The good news is that authorities from Luxembourg will maintain the lowest VAT rates in EU.

We can offer you information about the taxation in other countries, such as Czech Republic, Russia and our company formation agents can help you open companies there.

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