Luxembourg VAT explained: a worked example, from net price to VAT payable

The principle: money that passes through your business

On every invoice you issue, part of the amount is not yours: it is VAT.

According to Luxembourg’s indirect tax portal, value added tax (VAT) is a tax on turnover. In practice, a taxable business charges VAT to its customers on top of its price, then pays it over to the Registration Duties, Estates and VAT Authority (AED), after deducting the VAT its own suppliers charged it.

This article walks through the example from the video. For the full picture (registration, the small business scheme, invoicing), read our Luxembourg VAT guide.

The four VAT rates in Luxembourg

The 17% standard rate is the default: the 14%, 8% and 3% rates only apply to the supplies of goods and services expressly listed in the annexes of the VAT law of 12 February 1979. If you are unsure about the rate for a product, that text, published by the AED, is the reference.

From net to gross: calculating output VAT

The calculation always starts from the price excluding VAT (net). Multiply the net amount by the rate to get the VAT, then add it to get the price including VAT (gross).

• VAT = net amount × rate. At the standard rate: €1,000 × 17% = €170.
• Gross price = net amount + VAT, i.e. €1,000 × 1.17 = €1,170.
• Conversely, to find the net price from a gross price: net = gross ÷ 1.17 (at the standard rate). €1,170 ÷ 1.17 = €1,000.

In our example, your customer pays you €1,170. The €170 of output VAT passes through your cash: it belongs to the State, not to your profit.

Input VAT: what you recover on your purchases

Guichet.lu defines input VAT as “VAT paid to suppliers”. When you buy goods or services for your taxable business, the VAT shown on the purchase invoice is in principle deductible.

Continuing the example: you buy a computer for your business at €500 excluding VAT. At the standard rate, the invoice shows €85 of VAT (€500 × 17%), or €585 including VAT. Those €85 are your input VAT.

• VAT cannot be deducted if the goods or services purchased are used to carry out exempt activities; for mixed use, it is only partly deductible.
• Only Luxembourg VAT is deductible in Luxembourg.
• You must be able to provide all supporting documents on request: invoices, transport documents, payments, etc.

VAT payable: output minus input

Guichet.lu sums up the mechanism: a business pays the authority the difference between the VAT collected on sales to clients and the deductible VAT paid on purchases from suppliers. You only pay over the balance.

And if, over a period, your input VAT exceeds your output VAT (for example after a large investment)? According to Guichet.lu, the surplus can either be refunded or carried forward to the next taxable period to then be deducted.

When to file: frequency by turnover

How often you file depends on annual turnover excluding VAT. The administration alone is competent to determine the applicable scheme.

VAT returns must be submitted electronically through the eCDF platform (Collecte des Données Financières). Guichet.lu also notes that the monthly scheme is legally provided for by default.

A simple routine so nothing slips

1. 1
   Issue every invoice at the right rate, clearly showing the net amount, the VAT and the gross amount.
2. 2
   Keep every business purchase invoice: without supporting evidence, a deduction is hard to defend.
3. 3
   At the end of the period, total your output VAT and input VAT, then work out the balance.
4. 4
   File the return on eCDF before your scheme’s deadline, and pay any balance due.

VAT is not separate from your accounting: it flows directly from your invoices and expenses. Our article on accounting for self-employed professionals explains how to organise it, and Zuelen supports both independents and companies.

This article is general information and does not constitute tax advice. The amounts in the example are fictitious. For your situation, check the official sources or consult a professional.