Luxembourg confirms 2015 VAT rise from 15% to 17%

Thu 3rd Apr 2014

The Luxembourg government met last week to agree on the announced rise in Luxembourg VAT from 15% to 17% on 1 January 2015. The reduced VAT rates will also rise from 12% and 6% to 14% and 8%, respectively. The third reduced VAT rate of 3% (foodstuffs; print and e-books; and public transport) will remain unchanged.

The Prime Minister, Xavier Bettel, confirmed that the measure would help raise €350 million which would be vital to compensate for the scheduled change in EU 2015 B2C VAT digital services place of supply rules.

From January 2015, companies providing online books, music, film, games, music, telephony and similar services will have change from charging the VAT rate based on where they are located to where their consumers are. Over the past ten years, consumer electronic services companies have located their European headquarters to Luxembourg so as to be able to charge only 15% Luxembourg VAT – which is the lowest permitted by the European Union.

This will mean a huge loss of revenue for Luxembourg – approximately €700million per annum.  Luxembourg will however receive up to €1.2billion for the 2015 digital VAT changes.