Value-added tax revenues from e-commerce activities in Luxembourg have declined
sharply in the wake of European Union measures to reduce VAT competition in
According to revenue statistics announced by Minister of Finance Pierre Gramegna
in the Chamber of Deputies on July 20, total tax revenues were 1.6 percent higher
in the second quarter of 2017 compared to the same period last year.
However, Gramegna confirmed that e-commerce VAT revenues have continued to
plummet, and were 60 percent lower in the second quarter of 2017 compared to Q2 2016.
Luxembourg is believed to be the member state most impacted by the recent
change in the VAT place of supply rules for broadcasting, telecommunications,
and electronic (BTE) services, which from January 1, 2015, sought to ensure taxation in the
place of consumption rather than the place of supply.
The move eliminated the incentive for companies supplying goods and services
in Europe to locate themselves in member states with low rates of VAT.
In previous years, e-commerce firms supplying services in the EU flocked to
Luxembourg to take advantage of its VAT rate, which at 15 percent was the bloc's
However, since the change, Luxembourg has increased its rate of VAT to 17 percent.
In December 2014, it was reported that Luxembourg secured compensation worth
USD1.375bn from the EU in return for its support for the change in the BTE place
of supply rules.