Skip links

Luxembourg temporary VAT cut from 17% to 16% Jan 2023 – confirmed by Parliament

Chamber of Deputies ratifies 1-year cut of VAT rates in 2023

The Luxembourg parliament has agreed to the 3-party agreement of 28 September 2022 to temporarily reduce the standard VAT rate from 17% to 16% in 2023. This includes a cut to two of the three reduced VAT rates.

28 Sept 2022: Government agreement with unions and employers to provide tax subsidy as inflation soars

The three-party government, employers and unions (Tripartite Coordination Committee) group has agreed to cut Value Added Tax rates and a range of other measures. This is in reaction to inflation hitting 6.8% in August, up by over one third since the same time last year.

Get our free VAT newsletter for international VAT updates.

The new rates from 1 January to 31 January 2023 will be:

  • Standard rate: 16% (down from 17%)
  • Intermediate Reduced rate: 13% (down from 14%) on certain financial services;
  • Reduced Reduced rate: 7% (down from 8%) on gas & electricity; certain labour supplies; and
  • Super Reduced rate: 3% (no change) on books; pharmaceuticals; foodstuffs; water; newspapers.

Other measures announced include:

  • cuts to heating oil prices by €0.15 per litre
  • rate of minimum wage to be increased
  • cap on energy prices at 15% on today’s prices
  • Energy subsidies for small and mid-sized businesses
  • Subsidies for switching to electricity from oil and gas
  • Improvement on investment credits
  • Extra financial support for the elderly and their fuel bills

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.

May fuel VAT calculation cut

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 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.

Newsletter

Get our latest news right in your mailbox