VAT exemption for small businesses in Luxembourg: the EUR 50,000 threshold, the invoice wording, going over and opting out

The principle: invoicing without VAT below a threshold

Two invoices for the same EUR 1,000 job: one shows EUR 170 of VAT and a total of EUR 1,170, the other stops at EUR 1,000. The difference is not the client, it is the VAT regime of the business that invoices.

The SME scheme lets small businesses whose turnover stays below a threshold exempt their supplies of goods and services from VAT. According to the AED, the aim is to lighten their administrative burden: they do not have to charge and pay over VAT, nor file ordinary VAT returns.

This article covers that scheme only. For the full picture (rates, registration, returns), read our guide to VAT in Luxembourg.

The threshold: EUR 50,000 of annual turnover in Luxembourg

Since 1 January 2025 the national threshold is EUR 50,000 (it was EUR 35,000 before). For a business established in Luxembourg, the condition is that its annual turnover in Luxembourg did not exceed EUR 50,000 in the previous calendar year and in the current calendar year. Luxembourg has no sector-specific thresholds.

• Turnover is counted excluding VAT, on transactions carried out in Luxembourg.
• Purchases do not count: only the sales and services you supply.
• A business that is just starting can apply even with no turnover in the previous year (it reports “0”). The request goes through the initial declaration to the AED.

On the invoice: no VAT, one mandatory statement

A business under the scheme may not show VAT on its invoices. For supplies taxable in Luxembourg, the invoice must carry this statement. On French-language invoices the AED’s wording is « TVA non applicable – Article 57bis de la loi modifiée du 12 février 1979 »; the English version of the AED FAQ gives:

Since 2025 businesses under the scheme may also issue simplified invoices. For everything else an invoice must show, see invoice requirements in Luxembourg.

The flip side: VAT on your purchases is a cost

In return for the exemption, a business under the scheme cannot recover the VAT it pays on its purchases. Guichet.lu confirms that input VAT cannot be deducted when the taxable person is not required to charge VAT on its own sales.

Illustrative amounts. How recovery works is explained in our article on deductible input VAT.

What you still report: your turnover, before 1 March

In principle a business under the scheme files no VAT return. It must still inform the AED, before 1 March each year, of the turnover achieved in the previous year: by post, by email or with the simplified annual return form.

If you go over: the AED’s own example

Keep an eye on the threshold during the year. If turnover exceeds EUR 50,000 by 10% at most (EUR 55,000), the exemption continues until 31 December. If it goes above EUR 55,000, the exemption ends the day after the threshold is crossed. Whatever the overshoot, the business is excluded from the scheme for the following calendar year.

To check a price including VAT, use the Luxembourg VAT calculator.

Stay exempt or opt for VAT?

The scheme is optional. A business established in Luxembourg can give it up and opt for the regular regime by asking its tax office: the option takes effect on the first day of the following month, and the business stays under the regular regime for at least one calendar year.

The right choice depends on your situation: have it checked by your accountant or the AED. To keep invoices and expenses organised either way, see Zuelen’s features.