In an effort to reduce the impact of inflation on households and businesses, the Luxembourg government met with trade unions on 28 September to agree a new package of measures.

It was agreed that the standard VAT rate be lowered from 17% to 16%, the intermediate rate from 14% to 13% and the reduced rate from 8% to 7%.

For the record, four rates are currently applicable in Luxembourg:

  • a normal rate of 17 % for taxable operations other than those listed below
  • a super-reduced rate of 3 % for operations involving goods and services listed in Appendix B to the VAT law, for instance food products for human consumption excluding alcoholic beverages, therapeutic articles, various books and newspapers as well as clothing for children under 14 years old
  • a reduced rate of 8 % for operations involving goods and services listed in Appendix A to the VAT law, for instance gases, liquefied or in gaseous state, suitable for heating, lighting and powering engines, electrical energy and eat supplied by means of a heating network, as well as hairdressing and for certain works of art
  • an intermediary rate of 14 % for operations pertaining to goods and services listed in Appendix C to the VAT law, for instance wines of fresh grapes containing 13% or less of alcohol, with the exception of fortified wines, sparkling wines and liqueur wines, solid mineral fuels; mineral oils and wood intended for use as fuel as well as washing and cleaning preparations.

It is currently understood that the reduced rates will apply as of 1 January 2023. The proposed measures still need to be discussed and confirmed by the Luxembourg Parliament. We will provide an update on the developments accordingly.

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