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Background
On 1 January 2024, the provisions of the Law of 22 December 2023 amending the Value Added Tax (VAT) Law of 12 February 1979 entered into effect.
The purpose of this legislation is to extend the domestic reverse charge mechanism to new supplies.
The basic rule is that the supplier of goods or services must charge VAT on the transactions performed with the customer.
However, in order to combat VAT fraud, a domestic reverse charge mechanism applies for some goods and services delivered between two Luxembourg VAT taxable persons. The domestic reverse charge mechanism shifts the liability to pay the VAT to the Tax Authorities to the customer.
Before the change in legislation, the Luxembourg VAT Law only foresaw the application of the domestic reverse charge mechanism to CO2 emissions, gas and electricity certificates.
As from 1 January 2024, the domestic reverse charge mechanism is extended to the following supplies:
1) Mobile phones
2) Integrated circuits (such as microprocessors)
3) Video game consoles, tablets, laptops and headphones
4) Determined raw or semi-manufactured metals, including precious metals, except for those that are covered by the margin regime for second-hand goods, works of art, collection objects or antiques or that are covered by the special regime applicable to investment gold.
The domestic reverse charge mechanism does however not apply if the net sales amount for the supply of the aforementioned goods is below EUR 10,000. In such case, the VAT liability remains with the supplier.
Implications
From 1 January 2024, Luxembourg suppliers of any of the goods indicated above will need to adjust their invoicing accordingly, by not charging VAT and referring to the domestic reverse charge mechanism. On the other hand, Luxembourg VAT taxable persons receiving supplies of such goods will be required to self-assess VAT under the reverse charge mechanism (and to ensure that they are not charged with VAT by their suppliers) via the submission of the VAT returns.
Special attention should be paid to VAT compliance reporting obligations, as these transactions will need to be reported in different boxes in the VAT return.
At EY we can ensure a smooth transition to the new reporting of these types of goods and assist with any questions and concerns that may arise.
Summary