The new Luxembourg 2013-6 stability package has confirmed plans to raise the Luxembourg VAT rate in 2015.
The news of a potential Luxembourg Value Added Tax rate rise first came out on 10 April 2013. Whilst no VAT rate rise has yet been announced, it is anticipated to be 1% to take the existing VAT rate from 15% to 16%. This would enable Luxembourg to keep its standard VAT rate at the lowest in the European Union. The next current highest rate is 17% in Cyprus (Cyprus VAT rising to 18% in 2014) and Malta.
The Luxembourg rise is partially to help fill the shortfall in the VAT revenues from digital B2C sales. Under the EU 2015 VAT reforms, sellers of B2C ebooks, streaming films etc will have to charge the local VAT of their consumers – instead of the rate of where they are based. Luxembourg has attracted many digital retailers to locate within its borders to benefit from this tax loophole.