More Extensive Reverse Charge Mechanism in Luxembourg?

Nov 13
Luxembourg is one of the few EU member states that currently does not provide for a reverse charge mechanism for non-established businesses (Art. 194 VAT Directive).

In the fight against VAT fraud, the country is now considering an expansion of the reverse charge mechanism for the supply of certain fraud-sensitive goods.
Article 199bis of the VAT Directive allows member states to introduce a reverse charge mechanism for certain 'fraud-sensitive' supplies of goods and services.

When such a mechanism is applied, the supplier does not charge VAT, and the recipient must pay the VAT through their VAT return.

Currently, Luxembourg already applies a reverse charge mechanism to some of these fraud-sensitive transactions, including the transfer of emission rights, gas, and electricity.

This measure will be extended to include supplies of mobile phones, tablet computers, laptops, game consoles, and integrated circuits (such as chips and microchips). Deliveries of raw or semi-finished metals are also targeted.

Like other countries with a similar reverse charge mechanism, Luxembourg has chosen to link the application of the mechanism to a threshold amount.

Specifically, the seller remains responsible for VAT payment if the invoice amount, excluding VAT, does not exceed EUR 10,000, without considering subsequent price reductions. The implementation of the reverse charge mechanism in systems will, therefore, become somewhat more complex.

This is a draft law that still needs approval. In any case, the end date is (provisionally) set for December 31, 2026, aligning with the same end date in Article 199bis of the VAT Directive.