Answer ... (a) What are they and what are the applicable rates?
Value-added tax: Value-added tax (VAT) is essentially a consumer tax that is generally borne by the final consumer of goods and services (who is not a VAT taxable person).
VAT is charged at the following rated:
- standard rate of 17% (taxable transactions other than those mentioned below);
- intermediate rate of 14% (eg, some services of depositories, publication services);
- reduced rate of 8% (eg, electricity, gas); and
- super-reduced rate of 3% (essential goods and services, such as food, transport, books, residential construction in certain circumstances).
Registration duty: Registration duties are either fixed or proportional (ad valorem duty), depending on the deed to which it relates.
A fixed fee of €75 is due, for example, upon:
- incorporation of a Luxembourg company;
- amendment of its bylaws; and
- transfer of its statutory seat.
Proportional registration duties apply to documents that are registered with the registration authorities. Registration is compulsory in some cases and voluntary in others. For some documents, a rate that is proportional to the value of the contract concerned applies – for example, for loan agreements (non-compulsory ad valorem duty of 0.24%).
Under the referencing theory (théorie de l'usage), contracts referred to in detail in a deed that is registered are deemed to be registered themselves, with the corresponding levy of registration duties. This theory applies only to documents for which registration is compulsory within a certain period.
The acquisition of immovable property located in Luxembourg is subject to a registration duty of 6%, plus a 1% transcription tax. A municipal surcharge of 50% on the value of the registration duties is also due where the commercial property is located within the Luxembourg City municipality (ie, combined maximum rate of 10%).
(b) How is the taxable base determined?
VAT is levied on:
- supplies of goods and services within the territory of the Grand Duchy of Luxembourg by a taxable person in the course of the person’s business;
- intra-EU acquisitions of goods and of new means of transport; and
- imports of goods from non-EU countries.
The transfer of a businesses as a going concern may fall outside the scope of Luxembourg VAT.
The tax base is constituted in the case of:
- supplies of goods and services, or remuneration for the supply of goods or services;
- intra-EU acquisitions of goods and of new means of transport, by the purchase price of the goods or of similar goods, or, in the absence of a purchase price, by the cost price, determined at the time when these operations are carried out; and
- in the case of imports of goods, the value of the goods.
For registration duties, in principle, the tax base corresponds to the value stipulated in the deed of transfer, unless the fair market value of the property concerned exceeds such price stipulated in the deed. In case of doubt as regards the fair market value, the Luxembourg indirect tax authorities can request a valuation demonstrating that the price correspond to the fair market value.
(c) What are the relevant tax return requirements?
Depending on the activities performed, a VAT taxable person must file VAT returns on a monthly, quarterly or annual basis.
A company registered under the simplified VAT regime must file one simplified annual VAT return per year. A VAT taxable person registered under the normal VAT regime, must file VAT returns as follows:
- one single VAT tax return for an annual turnover of €112,000 or less;
- quarterly returns and one annual recapitulative VAT return for an annual turnover of more than €112,000; and
- monthly returns and one annual recapitulative VAT return for an annual turnover of more than €620,000.
(d) What exemptions, deductions and other forms of relief are available?
Exemptions from VAT are available for a number of supplies of goods and services. Examples include the following:
- Exemptions with credit for input VAT:
-
- intra-EU supplies of goods;
- exports of goods outside the European Union;
- work and repairs performed for the account of a foreign client on goods to be exported outside the European Union;
- the sale and hire of ships and aircraft engaged in international trade or professional fishing;
- repairs, conversions and maintenance performed on ships and aircraft engaged in international trade or professional fishing; and
- the international transportation of persons or goods.
- Exemptions without credit for input VAT
-
- medical care or services provided by hospitals, doctors, dentists and laboratories;
- transactions involving human blood, milk or organs;
- educational services;
- insurance and reinsurance transactions (except when rendered to clients outside the European Union);
- management services, including specific and essential investment advice and investment research, to investment funds listed at Article 44.1(d)), of the Luxembourg VAT Law (ie, investment companies in risk capital, specialised investment funds and undertakings for collective investment, if regulated by the Commission de Surveillance du Secteur Financier (CSSF) or a similar EU public body, as well as pension funds if regulated by the CSSF or the Commissariat aux Assurances, or by a similar EU public body, as well as securitisation vehicles subject to the 2004 Securitisation Law performing activities in scope of Article 1.2 of EU Regulation 24/2009, and alternative investment funds, regardless of any regulation);
- financial and banking services (except when rendered to clients outside the European Union);
- the supply and leasing of real property (except when it has been opted to subject the lease to VAT);
- the supply of gold and silver; and
- transactions involving shares.
VAT entrepreneurs are entitled to an input VAT deduction right – that is, from the VAT charged to its customers (output tax), the VAT entrepreneur deducts the VAT on the goods and services that are used for business purposes (input tax). Only the excess output VAT is paid to the tax administration. In the event of a possible excess of input tax, the taxable person may claim a refund.
For some gifts – such as manual gifts (donation manuelle) and indirect gifts (donation indirecte) – registration is not always mandatory, so it may be possible to make a gift free of registration duty.
For registration tax purposes, a tax credit of up to €20,000 applies on the registration and transcription fees in relation to the acquisition of a personal habitation subject to the condition of effective and personal occupation of the building.