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Luxembourg stable after VAT MOSS losses

  • Jan 10, 2016 | Richard Asquith

Luxembourg stable after VAT MOSS losses

Luxembourg has been given a positive review by a major credit rating agency on its handling of revenue losses following the 2015 B2C digital EU VAT changes.

Prior to 2015, many digital services providers (e.g. Apple, Amazon, Skype, Microsoft, Netflix) had located their European businesses in Luxembourg so that they could benefit from the rule to charge the local national VAT rate when selling to consumers across Europe. Luxembourg’s VAT rate was the lowest in Europe, 15% at the time.

The 2015 changes included obliging digital services companies to charge the VAT rate of their consumers’ countries of residency, and remit the VAT collected to the relevant country.

This change resulted in Luxembourg losing approximately €750m per annum in VAT revenues, over 2% of its GDP. To consolidate its finances, it raised its VAT rate to 17% on 1 January 2015. This raised approximately half of the VAT lost. Luxembourg therefore postponed a range of public expenditure programs.

Fitch, one of the world’s three large credit agencies, has declared Luxembourg’s measures as satisfactory for it to retain a ‘AAA’ rating.

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.