Luxembourg considers that it could lose €800 million per year as a result of the change in the rules used to determine the place of supply of consumer electronic services. This change in the EU VAT regulations is due to take effect from 1 January 2015.
This amendment to the EU VAT rules on electronic, broadcasting and telecom services is likely to have the consequence that the European headquarters of some international companies doing business in these sectors will not charge Luxembourg VAT to their EU customers but will be charging VAT according to the local VAT rules of the countries in which the consumers of their services are located.
The fall in government revenues gives Luxembourg a problem if it is to keep within the fiscal deficit rules that require the annual deficit to remain below 3%. .This was a reason for proposing an increase in the Luxembourg VAT rate to 17% on 1 January 2015. This measure will probably raise around €350m in additional government revenue. The lower VAT rates of 12% and 6% that apply to certain specified goods and service are also due to increase, reaching 14% and 8% respectively. There is currently no plan to increase the 3% reduced VAT rate.
