On 1 July 2024, the Luxembourg government introduced bill of law 8406 into Parliament to implement various EU law changes into Luxembourg VAT law with effect from 1 January 2025.
The changes envisaged result from Directives (EU) 2020/285 and (EU) 2022/542, which modify the VAT Directive (Directive 2006/112/EC).
These EU level amendments now being implemented into domestic law are mainly driven by the objective of adapting the VAT system to the current environment, notably to lighten the VAT administrative burden and adapt the rules to new digital solutions.
Accordingly, the VAT law changes consist as follows:
1. Increase of the domestic threshold for the special scheme for small businesses from EUR 35,000 to EUR 50,000 annual turnover generated in Luxembourg
This optional regime applies to small businesses established in Luxembourg for their domestic transactions. If they are involved in cross-border transactions, the regime described under 2) below should be used. It is worth noting that this national threshold of EUR 50,000 is not harmonised within the EU and thus might differ from one Member State to another, subject to a maximum limit of EUR 85,000.
Where a taxable person meets the conditions and opts for this regime, its transactions are VAT exempt without any VAT deduction right.
2. Introduction of a special scheme for EU small businesses with a threshold of EUR 100,000 annual turnover generated within the EU
This is a new optional special scheme to be introduced into Luxembourg VAT law which creates a VAT exemption for the transactions carried out by the taxable person. A taxable person established in another EU Member State could benefit from this special scheme for its transactions in Luxembourg if (i) its total turnover within the EU does not exceed EUR 100,000 and (ii) its turnover in Luxembourg does not exceed the national threshold of EUR 50,000.
Conversely, a taxable person established in Luxembourg could also benefit from this new EU scheme for its transactions carried out in another Member State, provided its annual turnover does not exceed (i) the EU threshold and (ii) the national threshold applicable in that Member State.
Under this scheme, a specific registration number will be issued to the taxable person with the suffix “EX”. This scheme is only available to taxable persons established within the EU and not to non-EU operators.
3. Extension of the 8% reduced VAT rate to all supplies of works of art, collectors’ items and antiques
The reduced VAT rate is currently only available for the import and certain supplies of works of art, collectors’ items and antiques, but the planned change will apply the reduced VAT rate to all supplies of such goods. However, when the reduced VAT rate applies, taxable dealers and organisers of sales by public auction will no longer be able to apply the margin scheme in this context.
4. Change of the place of taxation for virtual events
Where the supply of cultural, artistic, sporting, scientific, educational, entertainment and similar services or the access to such events is made virtually, the place of taxation (supply) will be where the recipient, whether a taxable or non-taxable person, is established or resides and not where the event takes place.
5. Removal of the VAT exemption for international passenger transport services
The VAT exemption for passenger transport services with a place of departure or arrival in a country other than Luxembourg will be abolished from Luxembourg VAT law.
