Luxembourg publishes draft law implementing ViDA measures applicable from 1 January 2027

Key Changes

On 30 July 2026, the Luxembourg Government submitted Draft Law n°8812 (Draft Law) to the Parliament. The Draft Law aims to transpose Article 2 of Council Directive (EU) 2025/516, which forms part of the European Union’s (EU) VAT in the Digital Age"(ViDA) package. The proposed legislation covers the ViDA measures scheduled to enter into force on 1 January 2027 and would introduce a number of targeted amendments to the Luxembourg Value Added Tax (VAT) Law.

The Draft Law focuses primarily on:

• expanding and clarifying the scope of the One-Stop Shop (OSS) schemes, including for certain non-EU suppliers and supplies of electricity, gas, heating and cooling;
• clarifying the EUR 10,000 threshold for certain cross-border business-to-consumer (B2C) services and intra-Community distance sales of goods;
• amending the rules governing the determination of the VAT chargeability applicable to OSS transactions, to further harmonize the rules through the EU;
• phasing out the call-off stock simplification regime in anticipation of the future OSS mechanism for transfer of own goods; and introducing targeted amendments to deemed supplier rules, Import OSS (IOSS), the cross-border small and medium-sized enterprises (SME) exemption regime and related administrative procedures.  

The proposed amendments are intended to reduce administrative burdens, improve VAT compliance, and adapt Luxembourg's VAT system to increasing digitalization and cross-border business activities within the EU.

Background

Council Directive (EU) 2025/516 of 11 March 2025 amending Directive 2006/112/EC as regards VAT rules for the digital age (ViDA Directive) seeks to modernise the EU VAT system, adapt it to the digital economy and strengthen the fight against VAT fraud. Luxembourg has opted for a phased implementation approach and, through the Draft Law, would transpose only those provisions becoming applicable on 1 January 2027. The explanatory memorandum expressly states that the Draft Law does not cover the other ViDA developments foreseen for a later stage.

The proposed amendments build upon the 2021 e-commerce VAT package that introduced a number of VAT and customs-related reforms to modernize and simplify the collection of tax on e-commerce transactions and is intended to further simplify cross-border VAT compliance across the EU.

Looking ahead: e-invoicing and digital reporting requirements

While the Draft Law focuses on the first ViDA measures applicable from 1 January 2027, businesses should not overlook the broader digital transformation agenda embedded in the ViDA package. The explanatory memorandum expressly confirms that the current draft law does not cover the other reforms introduced by the ViDA Directive, which will be implemented through future legislation.

Among the future developments, the ViDA Directive foresees the introduction of EU-wide digital reporting requirements and enhanced e-invoicing obligations. The ViDA Directive highlights the role of structured electronic invoicing, real-time transaction reporting and digital tax controls in improving VAT compliance, increasing transparency and reducing VAT fraud across the European Union.

From a business perspective, these forthcoming requirements should not be viewed solely as tax compliance obligations. As highlighted in EY's broader e-invoicing and finance transformation initiatives, the move towards e-invoicing can also represent an opportunity to modernize finance and tax functions, increase process automation, enhance data quality and governance, and provide real-time visibility over transactional data. Businesses that begin reviewing their Enterprise Resource Planning (ERP) systems, invoicing processes and tax data architecture early may be better positioned to manage future compliance obligations while unlocking operational efficiencies across the organisation.

For multinational groups, the progressive implementation of ViDA reinforces the importance of adopting a coordinated strategy that addresses both the tax and technology dimensions of transformation, particularly where cross-border transactions, shared service centres and future digital reporting obligations are concerned.

Implications for businesses

The Draft Law constitutes Luxembourg's first legislative step in implementing the ViDA package and confirms the EU trend towards greater digitalization and centralization of VAT compliance.

Businesses engaged in cross-border transactions, e-commerce activities, energy supplies, marketplace operations or intra-EU supply chain arrangements may wish to assess the potential impact of the proposed measures on their VAT processes, ERP systems and reporting frameworks.

Effective date

All measures covered by the Draft Law would enter into force on 1 January 2027, in line with the implementation timetable established by the ViDA Directive.

How EY can help

The implementation of ViDA is expected to affect not only VAT compliance processes but also technology architectures, finance operating models and data governance frameworks.

EY teams can assist businesses in:

• assessing the impact of the proposed Luxembourg measures on existing VAT compliance obligations;
• reviewing OSS, IOSS and cross-border transaction flows;
• identifying the implications of the withdrawal of call-off stock arrangements;
• evaluating ERP and tax technology readiness for future ViDA developments;
• preparing for upcoming EU digital reporting and e-invoicing requirements; and leveraging e-invoicing initiatives as part of broader finance and tax transformation programmes.

By combining VAT, process, data and technology capabilities, EY can help organisations move beyond compliance readiness and support the transition towards more efficient and digitally enabled tax and finance functions.