11 April 2013

Luxembourg VAT rate to be increased as from 2015

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The Luxembourg Prime Minister, Mr Juncker, has announced, in its "State of the Nation" speech, that Luxembourg will raise as from 2015 its VAT rate to help reduce its deficit and to cope with the loss of the VAT receipt linked to the changes of rules applicable to the E-commerce services (taxation at the place of the private consumer as from 2015 instead of the place of the supplier).

The standard VAT rate is currently 15% and is the lowest in the European Union. The Prime Minister has indicated the wish of the government to maintain the lowest standard VAT rate in the EU even after this increase. In this respect, the lowest VAT rates, after the Luxembourg one, are applied by Cyprus and Malta (18%, to be increased to 19% in Cyprus as from 2014). The Prime Minister has given no further indication.  At this stage, it is difficult to anticipate what will be the rate (due to budget constraints, 17% or 18% is however more likely than 16%) and whether this increase will be gradual or not.

Our VAT team will closely follow up this question and will duly communicate on it.