Temporary reduction of VAT in Luxembourg

Even wealthy Luxembourg is suffering from inflation, so to remedy the situation, Luxembourg is cutting almost all VAT rates. The measure is limited to the year 2023. by eClear

With effect from 1 January 2023 – and limited until 31 December 2023 – the following VAT rates apply in Luxembourg:

The standard VAT rate drops from 17 per cent to 16 per cent,
The average VAT rate drops from 14 per cent to 13 per cent
Reduced VAT rate (especially for gas and electricity) drops from 8 per cent to 7 per cent
The strongly reduced VAT rate of 3 per cent remains unchanged.

The measure serves to mitigate the current inflation. However, there is no explicit obligation to pass on the reduction to customers. Mainly, if a gross price were agreed upon, the provider’s margin would increase accordingly. Particular problems may arise in certain international constellations. Contracts running through the turn of the year 2022/23 and 2023/24 may also raise complicated legal issues under certain circumstances.

What are the VAT rates in Luxembourg?

In Luxembourg, there are four different VAT rates at which goods and services can be taxed. The standard rate is 17% and applies in most cases. There are also reduced rates of 14, 8 and 3%.

Regular VAT rates in Luxembourg

Normal tax rate: 17
Reduced tax rate: 8	Various services and repairs (e.g. cleaner in private households or for shoes, bicycles and leather goods) Hairdressing services
Highly reduced tax rate: 3%	Medicines Books, newspapers, and magazines Food Public transport Cultural events Agricultural goods Restaurant and hotel services Social housing construction and certain construction works in private housing construction
Intermediate rate: 14%	certain types of wine Fuels Detergents and cleaning agents Advertising leaflets Management of securities, loans, and loan collateral
Zero rate	Intra-Community and international transport