Luxembourg

Final B2G e-invoicing phase Our previous posts have frequently commented on the progress of B2G e-invoicing in Luxembourg. To date, this has been running smoothly without any major delays- and in line with this trajectory, we can expect small businesses to also be subject to B2G e-invoicing obligations from 18 March 2023.

Guidance on temporary reduced notes We recently communicated that Luxembourg is introducing some new temporary VAT rates, effective 1 January 2023. Tungsten is on track to integrate the temporary rates within our system by this date.  The Luxembourg Directorate of Registration, Domains and VAT has published Circular No. 812, dated 6 December 2022. This provides guidance around the temporary VAT rates. 

Temporary reduction of VAT rates Inflation is spiralling across Europe, compelling multiple government to closely scrutinise their fiscal policies. While typically this year we have seen governments target niche VAT rates, such as energy, gas or food, some governments are making more radical changes by overhauling their standard and reduced rates. Luxembourg is one such country – due to inflation standing at 6.9% in September 2022, it has been driven to review its tax measures. To this effect, Luxembourg has now announced a temporary decrease of the standard, intermediary and reduced VAT rate applied to goods and services, in line with the following:

• Standard rate: from 17% to 16%
• Intermediary rate: from 14% to 13%; and
• Reduced rate: from 8% to 7%.
• The super-reduced rate will remain unchanged at 3%.

These rates will apply from 1^st January 2023 to 31 December 2023. It is expected that the VAT rates will return to their original rate at the start of 2024. Tungsten is compliant in Luxembourg and supports all valid VAT rates in the country. Tungsten will ensure the new VAT rates are integrated as part of our solution once effective.

B2G mandatory e-invoicing Luxembourg is following the lead of e-invoicing developments in neighbouring countries Belgium and the Netherlands, by mandating B2G e-invoicing in the country. E-invoicing is projected to take place in a phased implementation in line with the following timeframes:

• 18 May 2022: Large companies in Luxembourg will be required to send e-invoices to the public authorities
• 18 October 2022: medium-sized taxpayers will follow suit
• 15 March 2023: small and new businesses will complete the transition to e-invoicing

Luxembourg will follow the path of many European countries by using the PEPPOL Network for B2G e-invoicing. This means that invoices will be converted into the standard PEPPOL BIS 3.0 format and transferred through the PEPPOL channel (AS4). It will also require companies to be connected to a PEPPOL Access Point, to facilitate connection with other participants on the PEPPOL Network. The move to e-invoicing will provide greater automation of the e-invoicing process, leading to reduced errors and cost-saving. Tungsten Network is compliant in Luxembourg and will follow e-invoicing developments in the country.

Joint incentive to reduce the VAT gap Belgium, Netherlands, and Luxembourg representatives have convened to discuss plans to reduce the VAT gap. Although Continuous Transaction Controls (CTC) have proven to be extremely popular in the past few years, with a means to reducing the VAT gap, the VAT gap remains high- 134 million Euros was lost in revenue the EU in 2019. Shared borders and economic interests between the 3 countries have prompted the countries to work together to reduce this gap yet further- a key factor in the implementation of e-invoicing mandates.

Further progress with B2G e-invoicing

Luxembourg is making significant progress with B2G e-invoicing, and has set out a timeframe for B2G e-invoicing in the country.
As with many other countries, the underlying aim is to introduce greater transparency within the tax authority domain, as well as improving efficiency of the transactions with the public sector.
Companies will be obliged to send invoices to government institutions via the PEPPOL Network.
The tax authority has acknowledged that this will instigate a radical overhaul in the way people work- and have therefore responded by outlining a phased approach for implementation, in line with the following:
• Large companies- mandatory to use e-invoicing from 18 May 2022;
• Medium companies- mandatory to use e-invoicing from 18 October 2022;
• Small companies: mandatory to use e-invoicing from 18 March 2023.
It is hoped that the phased implementation will allow companies to adapt their working models to accommodate B2G e-invoicing.