Since the 1st of July 2021, the VAT regime in Luxembourg has undergone some amendments initiated by the European Commission with the fundamental objective of regulating and controlling e-commerce activities. How can one come into compliance with these new changes?

The objectives of the new rules are the following:

  • ensure that the VAT is effectively paid in the country of consumption of the goods and services;
  • create a uniform VAT regime for cross-border deliveries of goods and services; and
  • offer businesses a simple and uniform system for declaring and paying the VAT and fulfilling their VAT obligations via the one-stop VAT shop: VATMOSS.

One of the main innovations concerns the intra-community delivery operations of goods. This situation is one where a taxable person for VAT purposes delivers a good or provides a service to a consumer established in an EU Member State different from the one in which it is established. For the sake of clarity and standardization, a single minimum threshold of €10.000 was established in all Member States, the threshold starting at which businesses must pay the VAT applicable in the Member State of the consumer of the good or service. One should thus be aware of the rate applicable, which varies from one Member State to another, to the good or service.

With a view to simplification, the use of a one-stop VAT shop (One-Stop-Shop or “OSS”) is extended to the intra-community distance selling of goods and to the distance providing of services. More concretely, taxable persons for VAT purposes established in Luxembourg will thus no longer have to register in each Member State in which their consumers are located (when the volume of goods or services exceeds the €10.000 threshold). They will simply have to register on the OSS portal (via the VATMOSS application), after having requested access thereto using a form to be sent to the AEDT.

In this way, they avoid having to fulfill all the administrative obligations in force in the various EU countries, particularly the obligation of VAT registration and consequently will only have the Luxembourg administration as a point of contact.

The main obligations are the following:

  • apply the VAT rate of the Member State into which the goods are shipped or in which the services are provided;
  • collect the VAT from the purchaser on intra-EU distance sales or on the provision of services;
  • submit a quarterly electronic VAT declaration via the OSS portal;
  • make a quarterly VAT payment; and
  • keep registers of all eligible One-Stop-Shop sales for 10 years.

Moreover, a new regime of “distance sales of goods imported from third territories or third countries” will apply when:

  • the supplier (whether or not established in the EU) transports a good with a value of less than €150 to where the purchaser is located or charges a third party to transport the good on its behalf;
  • the purchaser is a private individual, a legal entity not subject to VAT (a legal entity governed by public law, associations) or an entity subject to VAT benefitting from a particular regime (such as that for farmers).

The consequences are significant. The importation of those goods prior to the distance sale will be exempt from VAT and the VAT due will be that of the Member State where the goods are made available to the purchaser. By using the OSS system, a supplier will not be required to register in each EU Member State where it makes goods available to its customers.

In addition, electronic interfaces such as platforms, portals or market places, will be responsible for the VAT when they “facilitate” distance sales of imported goods with a value of less than €150. That is the case when the use of an electronic interface allows a purchaser and a supplier to enter into contact with each other and a sale of goods follows thereafter. Nonetheless, an electronic interface is not deemed to “facilitate” a delivery of goods when the operator of that interface participates neither in the setting of the terms and conditions of the sale, nor in the authorization of the invoicing, nor in the ordering or the delivery of the goods.

In practice, an electronic interface is liable for VAT on distance sales of goods imported by a seller when those goods:

  • were sent or transported from outside of the EU at the time of their sale;
  • were sent or transported in shipments of a value not exceeding €150; or
  • are not subject to excise duties (generally applied to alcohol or to tobacco products).

When platforms are responsible for payment of the VAT on imports, they need not effectuate VAT registration in each Member State in which they make the goods available to their customers but can use the OSS system.
The obligations resulting from the use of the OSS system by electronic interfaces are similar to those described above except that the frequency with which the declarations are to be submitted or payments made is monthly (not quarterly).

Finally, the exemption for the imports of goods of low value, meaning less than €22, has been eliminated.