Value-added tax (VAT) covers all stages of production and distribution of goods and services carried out in Member States of the European Union (EU)*.
When goods are supplied within the Member State in which they were produced, purchased, stored or imported, the seller is completing a national transaction. The supply is subject to VAT of the concerned Member State according to its applicable laws and regulations.
When goods are dispatched or transported to another Member State, the supplier is conducting an intra- Community supply. The VAT treatment of this supply depends on the status of the purchaser: taxable person or "non-taxable" person.
Intra-Community supply of goods to a taxable person
An intra-Community supply of goods to a taxable person may be VAT-exempt when the following conditions are met:
- the goods are transported outside the territory of the Member State, in which the goods are located at the time when the dispatch or transport starts
- the purchaser provides its VAT number delivered by another Member State than the one from which the goods are dispatched or transported.
In such circumstances, the supplier must:
- obtain and check the validity of the VAT number provided by the purchaser on the website of the European Commission, prior to delivery
- indicate the VAT number of its customer on its sales invoice as well as a mention of the exemption
- keep the proof of the transport of the goods outside the territory of Luxembourg. Article 45bis of Regulation 282/2011 specifies the types of proof to keep. The choice of the Incoterm is important: the use of the EX WORKS Incoterm should be avoided, because it creates a risk for the seller who is not in charge of transport.
For example: a Luxembourg company receives an order from a German company that provides it with its German VAT number. It delivers the goods from Luxembourg to Germany.
The intra-Community supply to the German customer is VAT-exempt in Luxembourg.
The VAT-taxable purchaser must declare an intra-Community acquisition in the country of arrival of the transport. The declaration is made using the reverse charge mechanism: the purchaser declares the VAT due on its purchase in its VAT return and claims the deduction of VAT at the same time.
For example: a Luxembourg company orders goods from a German supplier and provides its supplier with its Luxembourg VAT number. The goods are delivered in Luxembourg.
It receives an invoice without VAT from its supplier. It must declare an intra-Community acquisition taxable in Luxembourg. It immediately claims the deduction of the VAT thus paid in the same return.
|VAT DECLARATION OF THE BUYER|
AIC: 136 EUR (800*17%)
TOTAL: 136 EUR
ICA: 136 EUR
TOTAL: 136 EUR
|Balance||To pay: 0 EUR
"Triangular" intra-Community transactions
Certain goods are subject to successive sales involving one single transport. In this case, only one supply can benefit from the intra-Community exemption. The other sales are national transactions.
A simplification measure applies for so-called "triangular" transactions. This simplification measure allows to issue two invoices without VAT for chain transactions involving a purchaser/intermediate reseller with a single physical transport of the goods. The simplification measure can only apply to successive sales of goods involving three operators identified for VAT in three different Member States, with direct transport of the goods from the initial supplier to the final purchaser.
For example: a Luxembourg company (B) receives an order from a German customer (C), which provides it with its German VAT number. The Luxembourg company (B) orders goods from a French supplier (A) and asks the supplier to deliver the goods directly to its German customer (C).
- the sale by the French supplier (A) is an intra-community supply of goods exempt in France
- the purchase made by the Luxembourg company (B) is not subject to VAT in application of the triangular simplification measure
- the sale by the Luxembourg company (B) is an exempt subsequent supply of goods in application of the triangular simplification measure
- the German purchaser (C) declares an intra-Community acquisition in Germany.
The following procedures and declarations must be followed for implementation of the triangular simplification measure:
- the transport is organized by the first (A) or by the second (B) operator or by a third-party acting on their behalf
- the second operator (B) declares, in its VAT return, the acquisition and the subsequent supply of goods in specific lines for triangular transactions
- the second operator (B) declares its triangular sale in a recapitulative statement and makes specific mention of such in its sale invoice
- the final acquirer (C) declares an intra-Community acquisition in its VAT return as the final tax debtor.
Intra-Community sale to a "non-taxable" person
An intra-Community sale to a "non-taxable" person is always subject to VAT.
If the customer takes possession of the goods, the supplier is making a national supply of goods and must invoice the VAT of the Member State in which the goods are located at the time of the supply.
If the seller organizes the transport, the distance sales procedure applies:
The seller must invoice the VAT of the country of destination of the transport if the annual amount of it sales to nontaxable persons in this Member State exceeds the threshold set by the destination country. As long as the threshold has not been exceeded, the seller invoices the VAT of the country of departure of transport and is theoretically not required to identify itself in the destination Member State.
The applicable threshold for distance sales to Luxembourg is EUR 100,000.
- the supply of excise goods is always taxable in the destination country
- the supply of a new vehicle (less than 6,000 km or less than six months) is taxable in the country in which the vehicle will be registered. The purchaser must pay VAT according to the procedure specified by the concerned country. In Luxembourg, the VAT due must be paid to the Customs and Excise Administration prior to registration
- sale of second-hand goods as well as works of art, collector’s items and antiques that can benefit from a special profit margin scheme are always taxable in the country of departure of the transport.
Note that new rules will apply to sales of goods to individuals within the EU starting on 1 July 2021. Sellers must invoice their customers for the VAT of the country of destination of the goods. They may declare and pay the VAT due in the other countries to the Luxembourg authorities, using the VAT OSS ("One Stop Shop") system that is being developed. Sellers whose amounts of sales to individuals in the EU do not exceed EUR 10,000 may continue to invoice the VAT of the country of departure of the goods.
* 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.
Movements of goods between Member States must be declared, for statistical purposes, by filing Intrastat declarations.