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Temporary decrease of the VAT rates

According to the amended law of February 12, 1979 on value added tax (Appendixes A and C – Art. 39) and its circular n°812 of December 6, 2022 (attached), the Luxembourg VAT administration informs the taxable persons about a decrease in the VAT rates effective as at January 1, 2023.

Temporary decrease of the VAT rates

The temporary decrease of the Luxembourg VAT rates is part of measures aimed at combating the economic effects of inflation and will be effective between the period from January 1, 2023 to December 31, 2023.

The reductions concerns the following rates:

  • Reduction of the current standard rate from 17% to 16%,
  • Reduction of the intermediate rate from 14% to 13%,
  • Reduction of the reduced rate from 8% to 7%.
  • The super reduced rate of 3% remains unchanged.

In general, the applicable rate is the one in force at the time of the realization of the supplies of goods and / or services for the majority of the delivery of goods and services supplied to a non-taxable customer. However, we draw your attention to the fact that the application of exceptions remains quite complex in practice and a case-by-case assessment of the different transactions is necessary. Indeed, insofar as the rules relating to the chargeable event and the time the VAT becomes due differ according to the nature of the taxable transactions, a case-by-case analysis is recommended.

Moreover, considering that the deduction of the input VAT incurred is closely linked to the moment the VAT becomes due, a careful application of these rules can have a positive impact on the cash flow of taxable persons with limited or no right of input VAT deduction.

You will find in the above-mentioned circular issued by the Luxembourg VAT authorities different examples illustrating the different principles. We are at your disposal to assist you in identifying the potential VAT impacts of your situation.

Our teams of accountants and tax experts are at your disposal to answer any questions you may have in this respect.

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