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Luxembourg cuts VAT on fuel

59% fuel inflation prompts reduction in VAT calculation

Luxembourg enacted a cut in diesel fuel from 16 May 2022 until the end of the year. For certain uses, agricultural and industrial, it will only apply until the end of July 2022.

The cut is effected by restricting the base amount subject to VAT with a refund to the fuel seller, as opposed to a rate cut. This will mean an effective cut from 17% to 14% for most diesel uses.

Luxembourg inflation it an annualised rate of 7% in April 2022, up from . Inflation on fuel however hit 59%.  The effects of the Ukrainian war and Chinese continuing lockdown is being blamed.

Luxembourg magnate for fuel tourism – diesel 42% cheaper than in France

Luxembourg’s diesel and gasoline prices are much lower than those of neighbouring countries. Fuel tourism has accounted for an average 75% of fuel sales in Luxembourg. This is due to low duties and VAT rate. The small country has 234 service stations, of which 60% are along its borders. Gas currently sells there at 37% less than in France, while the price of diesel is 42% lower.

Many other countries are cutting VAT on electricity and food as global inflation rises due to supply chain problems caused by COVID-19 pandemic disruption and the invasion of Ukraine by Russia.

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