VAT is usually the first tax a new Luxembourg company meets in practice: it arrives with the first invoice, not with the first profit. What follows is the year-one picture, without the tax-manual detours.
Registration comes early
A company performing taxable activity in Luxembourg files an initial VAT declaration (déclaration initiale) with the AED, the registration authority for VAT, shortly after starting activity. This applies whether or not you expect to charge VAT from day one: the déclaration initiale is filed either way, and it is the document that puts you on the AED's map.
The output is your VAT identification number, the LU number your invoices, your accountant and eventually your EU clients will use.
The small-business franchise
Luxembourg operates a franchise regime for small businesses: below an annual turnover threshold, you can invoice without charging VAT. That sounds attractive, and for some side activities it is, but consider both edges of the trade before choosing it:
- You skip VAT on sales, which keeps prices simple for consumer-facing work.
- You cannot deduct input VAT, so the VAT on your laptop, software, rent and services becomes a real cost.
- B2B clients rarely care, because they deduct VAT anyway. The franchise mostly helps when your customers are private individuals.
Most growth-minded companies register normally: for a business buying services and equipment while selling B2B, deduction is worth more than the simplification.
Filing frequency: turnover decides
How often you file VAT returns depends on annual turnover. The bands that matter are €112,000 and €620,000: below the first, annual filing can suffice; between them, quarterly; above, monthly. Your accountant will confirm the exact rhythm the AED assigns, and it can change as you grow.
Two practical notes on frequency. First, more frequent filing is not purely a burden: if you regularly reclaim input VAT (common for exporters and B2B service companies selling abroad), monthly filing returns your cash faster. Second, missing an assigned deadline is the fastest way to turn a routine obligation into penalties and attention.
Cross-border basics
Luxembourg companies selling services B2B inside the EU typically invoice under the reverse-charge mechanism: no Luxembourg VAT on the invoice, the client self-accounts in their country, and the transaction appears in your recapitulative statements. Selling to consumers across borders, or moving goods, brings its own regimes. The rule of thumb for a young company: the moment your sales stop being "Luxembourg B2B or simple EU B2B services", have the setup reviewed before the invoices go out, not after.
The year-one VAT checklist
- File the déclaration initiale with the AED when activity starts.
- Decide franchise vs normal registration based on who your customers are.
- Put the assigned filing frequency in your calendar with a one-week buffer.
- Keep purchase invoices organised from day one; input VAT you cannot document is input VAT you cannot deduct.
- Revisit the setup when you cross a turnover band or start selling cross-border.
VAT is mechanical once configured correctly, and expensive when configured late. Our accounting team sets up registration, frequency and the filing calendar as one package, so nothing in this list depends on you remembering it.