VAT is a consumption tax. It is in principle paid in the Member State in which the goods are located for their consumption.
The implementation of this principle has the following consequences:
- the importation of goods in the European Union (EU) territory* is taxable: the import VAT is due in the Member State in which the release for free circulation is declared to customs
- the supply of goods on export with transport outside of the EU is VAT-exempt: no VAT will be invoiced to the purchaser if the goods effectively leave the territory of the EU.
Import of goods in Luxembourg
- if the goods were customs cleared for final importation in another member state prior to their delivery in Luxembourg: the import VAT will not be due in Luxembourg. An intra-Community acquisition of goods must be declared in Luxembourg
- If the goods are customs cleared for final importation in Luxembourg: the importer must declare the import VAT in Luxembourg.
To declare the import VAT due in Luxembourg, the taxable economic operator must be registered for Luxembourg VAT or it must appoint an approved Luxembourg tax representative.
Import with VAT
The import VAT due in Luxembourg is paid using the reverse charge mechanism in the importer's VAT return. In practice, the importer pays any customs duties due to the Customs and Excise Administration but not the import VAT. The import VAT is calculated in the importer's VAT return and is also deducted therein according to its right of deduction.
Example of import VAT reverse charge in Luxembourg: an economic operator imports computers from China to Luxembourg to resell them. The import is declared to Luxembourg customs in October.
In its October Luxembourg VAT return, the importer declares the following:
- the import VAT due
- the deductible import VAT amount.
No VAT pre-financing has taken place: the VAT due on import was "paid" by using the reverse charge mechanism.
(Luxembourg VAT rate has been
reduced to 16% for 2023)
Import: 85 EUR (500*17%)
TOTAL: 85 EUR
Import: 85 EUR
TOTAL: 85 EUR
To pay: 0 EUR
No import VAT is due on imports of goods:
- that are followed by a subsequent exempt intra-Community supply of goods ("procedure 42" import)
- or that are intended to be placed in a VAT warehouse arrangement.
In practice, the importer pays any customs duties due to the Customs and Excise Administration, but not the import VAT.
The "taxable" economic operator must be registered for Luxembourg VAT or it must appoint an approved tax representative to declare the exempt import.
Example of implementation of the import VAT exemption: An economic operator imports goods originated in China to Luxembourg:
- computers for immediate delivery to a German distributor (import and sale 1)
- aluminum, for storage in a VAT warehouse, waiting to find a purchaser (importation and placing 2)
The two imports are declared to Luxembourg customs in October.
The importer declares the amount of exempt import in its October Luxembourg VAT return.
No VAT pre-financing took place: the two imports were VAT exempt.
Import 1: 0 EUR ("procedure 42" exemption)
import 2: 0 EUR (VAT warehouse exemption)
Sale 1: 0 EUR (exempt)
TOTAL: 0 EUR
TOTAL: 0 EUR
To pay: 0 EUR
Distance sales of imported goods to a "non taxable" person
Since 1 July 2021, VAT exemption on low value goods has been eliminated. Since that date, all sales of goods imported in the EU are subject to the VAT of the country of destination of goods, regardless of the value of the imported goods.
For sales of imported goods with a value lower than or equal to EUR 150, the seller can declare and pay the VAT due in all Member States with a single VAT administration by using the IOSS ("Import One Stop Shop"). He may then sell the goods VAT included to his buyer.
The IOSS system concerns distance sales of goods:
- that are dispatched or transported by the seller from a third country or territory to the destination of a person in the EU
- whose value does not exceed EUR 150
- that are not subject to excise taxes
If the seller opts for the IOSS to declare sales to private individuals, he must:
- submit a monthly VAT declaration electronically using the IOSS portal
- make a monthly payment of the corresponding VAT to the Member State of their IOSS identification
- keep detailed records of all sales declared via the IOSS, and keep such records for 10 years
If the seller does not opt for the IOSS, the individual buyer must pay the VAT due on import as well as any administrative fees to the carrier delivering the goods to him, at the time of receipt of his order.
Import of manufactured tobaccos
Imports of manufactured tobaccos are subject to a special VAT scheme. This concerns imports of cigarettes, cigars and cigarillos, smoking tobaccos, snuff or chewing tobacco. This special scheme is specified by a Grand-Ducal regulation based on the VAT law.
It is however possible to use a VAT suspensive arrangement to import manufactured tobaccos, that suspends the application of the special scheme. In this case, a Grand-Ducal regulation provides that the VAT due upon removal from a VAT suspensive arrangement is paid to the Customs and Excise Administration by the operator responsible for the warehouse.
Export of goods from Luxembourg
The sale of goods shipped or transported from Luxembourg to a third country or territory is VAT-exempt due to the exportation.
The conditions for exemption of a supply of goods on export are the following:
- the goods must be dispatched or transported outside of the EU fiscal territory
- the transport must be organized by or on behalf of the seller or purchaser who is not established in Luxembourg.
The seller must keep the export customs declaration. The export declaration can be required in case of an audit, to prove the reality of the export.
The seller must declare the exempt export supply of goods in its VAT return. He must moreover make a reference to the application of the VAT exemption claimed on his sales invoice.
* From a VAT point of view, one still speaks of the European community and not of the European Union. For reasons of consistency, we will use the term "Union" in this portal.