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Luxembourg loses 60% of e-commerce VAT

  • Jul 21, 2017 | Richard Asquith

Luxembourg loses 60% of e-commerce VAT

2017 Luxembourg government revenue figures have confirmed that the 2015 e-services EU VAT MOSS reform has cost the principality over 60% of its e-commerce revenues.

The reforms shifted the B2C e-services place of taxation from the origin of the provider to the location of consumption – generally where the consumer is ordinarily resident.  Historically, many e-services providers – including Skype, Amazon, Apple, Google – had located their EU businesses in Luxembourg to benefit from the (then) 15% VAT rate, the lowest in the EU.

The original plan had been to change the basis of taxation to the destination principle in 2010, as part of the reforms of B2B services.  However, Luxembourg secured a 5-year delay to allow it to plan for the fiscal shock of lost revenues.  It also secured 3-year parachute payments worth over €1billion from other member states which kicked in from 2015.  Luxembourg raised its VAT rate to 17% at the same time to help meet the shortfall.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.