How to Manage VAT for Your Business in Luxembourg?

Value Added Tax (VAT) is an integral part of the life of every Luxembourg company, whether a startup, an SME, or a more established business. Yet, its management often remains a source of confusion and errors, particularly when it comes to choosing the right filing regime, meeting deadlines, or applying the correct rates.

In Luxembourg, VAT is overseen by the Administration de l’Enregistrement, des Domaines et de la TVA (AED), which imposes strict rules on reporting, invoicing, and recovery. A solid understanding of these obligations not only helps avoid penalties but also allows you to optimize your company’s cash flow.

In this article, Omnitrust provides a clear and practical overview to help you understand VAT in Luxembourg: the basic rules, the choices to make in terms of filing, your administrative obligations, and the support solutions available to ensure compliant and stress-free management.

 

1. VAT in Luxembourg: General Framework and Basic Principles

1. Definition and Operation of VAT

VAT (Value Added Tax) is an indirect tax applied to the consumption of goods and services. Any business established in Luxembourg that carries out an economic activity may be subject to this tax, which is collected on behalf of the State and remitted to the Administration de l’Enregistrement, des Domaines et de la TVA (AED).

In practice, VAT is an indirect tax borne by the final consumer (individuals or businesses not subject to VAT).
The company acts as the collector of VAT on behalf of the State. It charges VAT on its sales (output VAT) and, in return, it may deduct VAT on its purchases and general expenses (input VAT). The balance resulting from offsetting output VAT (due) against input VAT (deductible) must either be paid to the AED or carried forward to the next period, where applicable.

It is important to keep in mind that VAT does not belong to the company but to the State.

2. Applicable VAT Rates

Luxembourg applies several VAT rates depending on the nature of the goods or services:

• Standard rate: 17%
   
• Intermediate rate: 14% (e.g., certain energy products or specific services)
   
• Reduced rate: 8% (e.g., catering, social housing)
   
• Super-reduced rate: 3% (e.g., food products, books, medicines)
   

The complete list of applicable rates is available on the official AED website, which also specifies special cases.

3. Businesses Subject to VAT

Every business or self-employed person carrying out an economic activity is, in principle, subject to VAT, unless specifically exempt (e.g., certain medical or educational professions).

From the very start of operations, it is essential to determine whether your business is subject to VAT. This will determine whether your company must apply for a Luxembourg VAT number and under which regime it must file.

Some activities may qualify for the small business exemption scheme if their annual turnover remains below a threshold set by the AED. This scheme exempts the business from charging VAT but also limits the right to deduction. Nevertheless, VAT registration remains mandatory.

2. Choosing the Right Filing Regime: Monthly, Quarterly, or Annual?

The VAT filing regime depends on the turnover achieved by your business in Luxembourg. It is not a free choice: the Administration de l’Enregistrement, des Domaines et de la TVA (AED) determines the filing frequency based on precise thresholds. A solid understanding of these regimes helps avoid declaration errors and penalties.

1. The Three AED Filing Regimes

• Annual regime: for businesses with annual turnover ≤ €112,000 (excl. VAT)
  → A single return, due before 1 March of the following year.
   
• Quarterly regime: for turnover between €112,000 and €620,000 (excl. VAT)
  → Quarterly returns, due before the 15th of the month following each quarter.
  → An annual summary return, due before 1 May of the following year.
   
• Monthly regime: mandatory for turnover > €620,000 (excl. VAT)
  → Monthly returns, due before the 15th of the following month.
  → An annual summary return, also due before 1 May of the following year.
   

It is very important to understand that filing periodic returns does not exempt you from filing an annual return. Periodic returns serve as advance payments of VAT for the calendar year, to avoid a large balance due when filing the annual return.

Since 1 January 2020, all returns (monthly, quarterly, annual) must be filed online via eCDF on MyGuichet.lu.

2. How Is Your Regime Determined?

At the time of VAT registration, you must provide a realistic estimate of your annual turnover. Based on this, the AED assigns your company to the appropriate regime.

The regime may later be modified and adapted — generally after the first financial year and based on the latest annual VAT return — or upon your request if your turnover changes.

3. Choosing Wisely for Better Management

Even though the regime is legally based on turnover, it remains strategic to anticipate your situation:

• A rapidly growing business may move from annual → quarterly → monthly.
   
• A monthly regime allows faster recovery of VAT on major expenses or investments.
   
• Regular reporting helps avoid errors, VAT reassessments, and late payment penalties.
   

Sometimes, it is wise for a company to choose a “higher” regime to ensure efficient cash flow management and closer monitoring of accounting.

With Omnitrust, you are supported from VAT registration onward: we analyze your situation, ensure your compliance, and anticipate possible changes.

 

3. Your VAT Obligations as a Business

Once registered for VAT, a Luxembourg company has certain rights (the main one being the right to deduct input VAT). However, it also has obligations, notably to comply with its tax, reporting, and documentation requirements. These obligations are governed by Luxembourg VAT law under the Administration de l’Enregistrement, des Domaines et de la TVA (AED), and failure to comply may result in penalties or late payment interest.

1. Obtaining an Intra-EU VAT Number

Before a business can charge or recover VAT, it must have a valid VAT number issued by the AED. This registration is generally required at the time of company formation or as soon as exemption thresholds are exceeded.

The Luxembourg VAT number begins with LU, followed by 8 digits. It is mandatory in order to:

• Issue invoices with VAT
   
• Carry out intra-EU transactions (purchases/sales within the EU)
   
• Comply with reporting obligations
   

VAT numbers can be verified at any time via the European Commission’s VIES platform:
Check a VAT number – European Commission

2. VAT Returns: Frequency and Deadlines

Depending on the applicable regime (annual, quarterly, monthly), VAT returns must be filed within the following deadlines:

• Monthly: by the 15th of the following month
   
• Quarterly: by the 15th of the month following each quarter
   
• Annual: by 1 March of the following year (or 1 May if quarterly with additional annual summary)
   

Returns must be filed through the eCDF platform. They include:

• VAT collected on sales
   
• VAT deductible on purchases
   
• The balance payable or refundable
   

More complex operations — such as distance sales, intra-EU or extra-EU transactions, or out-of-scope activities — may require additional reporting or close monitoring.

Engaging an expert to handle your VAT returns provides significant added value, both in ensuring compliance and optimizing your tax position.

3. Invoicing: Mandatory Information

Every invoice issued must comply with the legal requirements set by the AED. It must include, in particular:

• The VAT number of the seller and the buyer (if applicable)
   
• The VAT rate applied or reference to the exemption
   
• The net amount, VAT amount, and total gross amount
   
• The date, invoice number, and precise description of the goods or services supplied
   

Specific rules apply to simplified invoices and electronic invoices. The AED may carry out documentation compliance checks at any time.

 

4. How Omnitrust Supports You in Managing VAT

Whether you are setting up your company or already established, we support you through every stage of your VAT management:

• Registration and obtaining your VAT number from the AED
   
• Monthly or quarterly returns, depending on your regime
   
• Annual return, filed within the required deadlines
   
• Ongoing monitoring of your thresholds and obligations, to anticipate any regime changes or administrative requests
   

You benefit from rigorous follow-up, without hidden costs or unpleasant surprises.

Key Takeaways

VAT management in Luxembourg is governed by strict rules set by the AED. To remain compliant, every company must:

• Know its reporting regime based on annual turnover
   
• Respect filing deadlines via the eCDF platform
   
• Ensure that invoicing meets legal requirements
   
• Maintain regular and accurate accounting
   

Whether you are in the creation phase or already active, proper VAT management helps you avoid costly mistakes and allows you to focus on your business.

Need Clear and Reliable Support?

Omnitrust assists you at every step: registration, periodic returns, regulatory monitoring, and communication with the administration.

Contact our team for tailored support.