Luxembourg: Draft Bill to Implement Changes Imposed by Two EU Directives Approved by Government

At the end of July, the government of Luxembourg approved a Draft Bill to implement changes following two EU Directives. If the Parliament votes positively on the Draft Bill, it will enter into force on January 1, 2025, thus bringing important novelties to VAT regulations in Luxembourg.

Impact of the Bill

Small businesses will face relief from utilizing the special regime based on the increased registration VAT threshold from EUR 35,000 to EUR 50,000 in annual turnover generated in Luxembourg. Apart from the threshold increase, the scope is expanded from only domestic transactions to certain cross-border activities, such as selling goods or providing services to clients and consumers in other EU Member States.

VAT exemption will be available for taxable persons in other EU Member States provided their annual turnover in the EU does not exceed EUR 100,000 and their annual turnover in Luxembourg remains under EUR 50,000.

Under the proposed changes, a reduced VAT rate of 8% is suggested for works of art, second-hand goods, collector's items, and antiques. This is a departure from the current margin taxation scheme, which aims to provide a more favorable tax treatment for these specific goods.

As per the draft bill, the Luxembourg government has proposed changes in the taxation rules for cultural, artistic, sporting, scientific, educational, entertainment events, or similar activities.  From 2025, the place of taxation for physical access to these events will be where the event takes place, while the place of supply for virtual events will be where the buyer is located or established. 

An additional important novelty is the proposed abolishment of the VAT exemption for passenger transport to or from a foreign country, resulting in the Luxembourg VAT applying only to the part of the journey in Luxembourg.

Conclusion

These changes aim to align Luxembourg's taxation rules for live and virtual events with modern practices and maintain Luxembourg's position as an important place for trading, especially in artworks.

Businesses in Luxembourg should examine these changes' effect on their day-to-day operations and take the necessary steps to prepare for compliance.

Source: Deloitte, Council Directive (EU) 2020/285