A consumption tax is a value-added tax (VAT). It is a tax on turnover that burdens final consumption and is assessed on each party’s turnover at each stage of the transaction. It includes all aspects of economic activity and is calculated based on the value contributed to the product. VAT is not considered a cost price component of products or services and is neutral in theory. Taxpayers must first determine the production tax by multiplying the realized turnover by the required tax rate. The tax invoice sent to the taxable person by their suppliers then reduces the result obtained (input tax). An organization (taxable person) that wishes to register for VAT must submit an initial declaration to the Administration de l’enregistrement, des domaines et de la TVA (AED).
VAT number registration steps
The steps for registering are as follows:
Initial statement
The taxable person must deliver an initial declaration or a declaration of an option appropriate to their circumstance to the responsible tax office in order to register for VAT, specifically:
- If enrollment is required.
- The first statement for natural individuals.
- The first declaration for entities with legal status.
- If signing up is optional.
- Either an option (ICA) declaration for natural people.
- A statement about the legal person’s option (ICA).
You can make these disclosures either online at MyGuichet.lu or by mail. The tax office Luxembourg 10 (bureau d’imposition) registers taxable individuals who engage in economic activity in Luxembourg but whose registered office is located elsewhere in the European Union.
Information and documents to be included with the application
The declaration must be accompanied by the following for legal persons (companies):
- A translation of the constitution in German or French.
- A duplicate of each partner’s passport or identity card stated in the constitutional documents.
- An identity card copy is enclosed with the declaration in the case of natural persons.
The following details must be included in a company’s initial declaration:
- The business name.
- lawful form.
- The registered office’s address.
- Names and addresses of the business managers/directors of the company.
- For a natural person, the taxable person’s last and first name, civil status.
- A bank account number (IBAN + BIC) or postal checking account (CCP) number.
Acquiring the VAT number
The taxable person (or non-taxable legal person) receives a VAT identification number after registering for VAT. This number is made up of an 8-digit, one-of-a-kind number that is preceded by the letters “LU”. Trade inside the community is conducted using the VAT identification number. The taxable individual must always communicate with the administration using their 13-digit national identity number (matricule), which was given to them. The initial period for which a VAT declaration must be submitted is determined by the activity’s commencement date and the financial year. Estimation of the anticipated annual turnover tax is conducted by prediction of intra-community purchases and deliveries of products or services. One of the factors considered to establish the periodicity for filing declarations will be the application for registration which will be decided upon by the appropriate tax office. The administrator may request further information or documentation regarding the business activity of the applicant for registration or a VAT number in addition to the data on the first declaration.
VAT rates in Luxembourg
The standard VAT rate that the EU member states must use must be at least 15% and apply to both the provision of goods and services. Only the supplies of goods or services mentioned in Annex III of the VAT directive are eligible for one or two reduced rates that cannot be lower than 5%.
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