€100,000 EU VAT Franchise for Small Business in Luxembourg

Since 1 January 2025, the Luxembourg VAT Law lets small businesses in Luxembourg sell into other EU countries without charging local VAT — as long as their EU-wide annual turnover stays below €100,000 AND they respect the national SME threshold of each destination country. This is the new cross-border SME VAT franchise (régime de franchise transfrontalier).

For sales outside the EU (USA, Dubai, UK, Switzerland, etc.), a completely different set of rules applies — usually more favourable, and not affected by this scheme.

30-second rule of thumb

• Your clients are outside the EU (USA, UK, Switzerland, Dubai, etc.)? Don’t worry about EU VAT. For B2B services, the place of supply is the client’s country — no Luxembourg VAT to charge. Goods exports are zero-rated. Just invoice net with a note about the place of supply.
• Your clients are only in Luxembourg? The new cross-border rules don’t concern you. Use Luxembourg’s own €50,000 SME franchise (with 10% tolerance = €55,000) for local sales, or register for normal VAT above that.
• You sell into other EU countries? Two numbers to keep an eye on:
  • €100,000 — your total annual turnover across all EU Member States combined (current year plus prior year). Go above this, and you lose the EU cross-border franchise entirely.
  • Each destination country’s national threshold. The lowest in the EU is Portugal at €15,000/year; most are in the €20,000–€25,000 range. Check the threshold for each country where you sell.

When to check: at a minimum, review your prior-year totals and your year-to-date per country when you plan the year — and once a quarter thereafter (quarterly reports to the AED are mandatory once you’ve opted in). If your sales to a single EU country are approaching €15,000–€25,000, check that country’s threshold before your next invoice. The other guides on registering, EU clients and your VAT return are gathered under VAT in Luxembourg.

Legal basis: Directive (EU) 2020/285, transposed by the Loi du 20 décembre 2024 (Mémorial A 574) — art. 57bis Loi TVA (national franchise), art. 57quater Loi TVA (outbound cross-border franchise for LU-established businesses). Art. 57ter covers the inbound case (EU-established businesses using LU’s franchise) and is outside the scope of this article.

What changed on 1 January 2025

Before 2025: if you were a Luxembourg freelancer using LU’s national SME franchise (under €50,000 turnover, no VAT on invoices), and you made even one sale to a German or French consumer, the destination country could require you to register for VAT there immediately. The LU franchise did not follow you across borders.

Since 1 January 2025: the EU introduced a cross-border SME franchise that extends the benefit of small-business VAT exemption into other Member States. If you qualify, you can sell B2C into Germany, France, Belgium, etc., without charging VAT in those countries and without registering there.

The two thresholds — both must be respected

To use the cross-border franchise, you must stay below two thresholds at the same time:

1. The EU-wide €100,000 ceiling

Your total annual turnover across all EU Member States (including Luxembourg) must not exceed €100,000 — looking at both the current calendar year and the prior calendar year.

2. The destination country’s national SME threshold

Each Member State sets its own national SME threshold. You must also stay below that threshold in each country where you sell.

Both thresholds work together. If your EU-wide turnover is €80,000 (under €100k), but you sold €30,000 into Germany, you’ve exceeded Germany’s €25,000 prior-year threshold. You lose the franchise in Germany only, not the whole scheme. You keep it in other countries where you’re still under their threshold.

Luxembourg’s own national franchise is separate

Don’t confuse the two schemes:

• Luxembourg national SME franchise (art. 57bis Loi TVA) — the Luxembourg VAT exemption for sales inside Luxembourg. Threshold: €50,000, with a 10% tolerance (€55,000). Separate opt-in.
• EU cross-border SME franchise (since 2025) — for sales into other EU countries. EU-wide ceiling €100,000 plus destination country’s own threshold. Separate opt-in.

You can use both at the same time. A LU freelancer with €30k of local sales and €40k of sales taxed in Germany/France (goods shipped there, for example) can be exempt from VAT in Luxembourg (under €50k domestic) and exempt in Germany/France (under €100k EU-wide and under each national threshold). Ordinary services to private clients there do not split this way: they are Luxembourg supplies (article 17 §1 c), so the €40k would join the €30k and make €70k — over the €50k.

How to opt in from Luxembourg

1. Log in to MyGuichet.lu (authenticated, with LuxTrust or Luxembourg eID).
2. File a prior notification (notification préalable) with the AED, listing the Member States where you plan to use the franchise.
3. The AED issues you a special VAT identifier ending in the suffix “EX” (for example, something of the form LU12345678-EX). This EX number confirms your cross-border franchise status.
4. File quarterly reports through MyGuichet.lu, within one month of the end of each quarter, showing your turnover in Luxembourg and in each EU Member State. Your exact filing landscape depends on which regimes you use:
   • National-only franchise (LU-sited sales only, no cross-border election): no periodic VAT returns — before 1 March you tell the AED, in writing, your Luxembourg turnover of the previous year (article 57bis §4). The annual simplified declaration via eCDF is due only if you supplied services to business clients in other EU countries or owed VAT yourself, on a service bought from abroad for example.
   • Cross-border franchise (this article): prior notification + quarterly EX reports via MyGuichet.lu.
   • Mixed regimes (part franchise, part normal VAT): standard VAT returns, with franchise turnover reported in box 481.
5. You can opt out at any time by filing an exclusion request with the AED.

Quarterly reports are mandatory. Missing them can cost you the franchise. Set a calendar reminder: end of March → report due by end of April; end of June → end of July; and so on.

Franchise or normal VAT registration?

Being under a threshold does not automatically mean the franchise is the right choice. Opting into the franchise (LU national or EU cross-border) is a trade-off:

• Pro: no output VAT to charge or declare on franchised sales
• Pro: simpler admin — no standard VAT returns on those operations
• Con: no input VAT recovery on your LU business costs — office rent, software subscriptions, equipment, accountant fees, co-working, professional services

The franchise usually wins if your business is pure services with minimal overhead — solo coach, writer, translator working from home.

Normal VAT registration usually wins if:

• You have significant input VAT costs (office, equipment, software, advertising, professional services)
• Your output VAT would be €0 anyway — for example, B2B services to non-EU clients, or exports of goods. In that case the franchise adds nothing and blocks your input VAT recovery
• You expect to grow through the thresholds soon anyway — easier to set up once than switch regimes

Over a full year, franchise vs normal is a cash-and-admin choice, not a “pay less VAT” choice. The output VAT you don’t charge is also VAT your B2B customers aren’t reclaiming further down the chain.

When you exceed a threshold

If you exceed the €100,000 EU-wide ceiling

• The exemption ceases the day after the ceiling is exceeded.
• You must notify the AED within 15 working days.
• From that point on, standard VAT rules apply in each country where you sell. You may need to register for VAT in those countries (or use the One Stop Shop (OSS) scheme for B2C distance sales).

If you exceed a destination country’s national threshold

• You lose the exemption in that country only.
• You keep the franchise in other countries where you’re still under their national threshold and under the €100k EU ceiling.
• Under Directive 2020/285, a default tolerance of 10% applies: if your in-country turnover exceeds the national threshold by no more than 10%, you can continue to benefit from the franchise until the end of the calendar year. Each Member State may extend this tolerance up to 25% at its option. Luxembourg applies the 10% default; other countries vary.
• Note: the €100,000 figure is the EU-wide cross-border ceiling, not a per-country cap. Breaching €100,000 EU-wide ends the franchise everywhere (see above).

What counts as “EU sales” — and what doesn’t

Every sale whose place of supply (for VAT purposes) is in an EU Member State counts toward the €100,000 ceiling, Luxembourg included: the AED’s FAQ on the franchise adds up your turnover in all Member States, including the one where you are established. Only the sales placed in a destination country count toward that country’s threshold. Sales outside the EU are a different story.

Selling outside the EU: USA, Dubai, UK, Switzerland

For sales to countries outside the EU, the cross-border SME franchise does not apply — and usually doesn’t need to, because the place-of-supply rules often mean no EU VAT is due in the first place.

After Brexit (1 January 2021), the UK is treated as non-EU for VAT purposes. Switzerland was never in the EU VAT system. USA, Dubai (UAE), and all other non-EU countries follow the same place-of-supply logic.

B2B services to non-EU clients (consulting, IT, design, translation, etc.)

Under the general rule (art. 17 Loi TVA, EU art. 44), the place of supply is the client’s country. So:

• No Luxembourg VAT is due.
• You issue your invoice net of VAT.
• Add a note on the invoice: “VAT not applicable — place of supply outside EU / prestation située hors champ d’application de la TVA luxembourgeoise.”
• The client handles any local tax obligations in their own country.

This means a Luxembourg IT consultant invoicing a US company has €0 LU VAT to charge on those sales. Under the normal regime they still go on the VAT return — article 64 of the VAT law asks for operations outside its territorial scope too — in box 019 (Autres opérations réalisées (imposables) à l’étranger) of the eCDF VAT return form.

B2C services to non-EU consumers

More nuanced:

• General rule (art. 17 §1 c Loi TVA): place of supply = supplier (Luxembourg) → LU VAT applies.
• Exception for intellectual and intangible services (art. 17 §2 8° Loi TVA, EU art. 59): for specific services supplied to non-taxable persons outside the EU, place of supply = customer’s country → no LU VAT.

The art. 17 §2 8° list includes:

• Consulting, legal, accounting, engineering services
• Advertising
• Data processing, provision of information
• Licensing of copyrights, patents, trademarks
• Financial and insurance services
• Provision of personnel
• Rental of movable tangible assets (except means of transport)
• Electronically supplied services (software, SaaS, online content) — under their own rule, art. 17 §2 7bis°, to the same effect

If your service to a non-EU consumer falls in this list — no LU VAT. If it doesn’t — LU VAT applies (unless you’re exempt under a different scheme).

Telecoms, broadcasting, and electronically supplied services to non-EU B2C consumers follow their own place-of-supply rules (use and enjoyment, OSS). Electronic services are in the list above because they overlap; telecoms and broadcasting are treated separately and are not part of the art. 17 §2 8° “intellectual services” list.

Goods exported to non-EU countries

Exports of goods are zero-rated (0% VAT) under art. 43 Loi TVA, with export proof required (customs declaration / EX-A document). You charge €0 VAT, but the sale is still a “Luxembourg taxable operation” that sits in your VAT return at 0%.

Switzerland — watch for their local threshold

Switzerland has its own VAT system. Foreign businesses must register for Swiss VAT once their Swiss-located turnover is reasonably expected to reach CHF 100,000 within the next 12 months. Foreign businesses without a Swiss establishment must also appoint a Swiss fiscal representative (Steuervertreter) for registration. This is separate from anything on the Luxembourg side.

How non-EU turnover affects your Luxembourg thresholds

This is the question that catches people off guard. Even if non-EU sales don’t trigger EU VAT, they may still count toward Luxembourg’s domestic thresholds.

So a freelancer with €200k USA turnover and €0 EU turnover:

• EU cross-border franchise: not relevant (no EU sales)
• LU national franchise (€50k): technically eligible (the €200k of out-of-scope B2B services doesn’t count toward the €50k), but not the right choice here — with €0 output VAT on her sales anyway, the franchise only blocks her input VAT recovery. Normal VAT registration wins (see the section above on franchise vs normal)
• Double-entry bookkeeping: mandatory (turnover is over €100k) — as the ACD’s circular on bookkeeping duties explains, a trader keeps double-entry books from the year after a year above €100k, a liberal profession from the year after the one in which the tax assessment (bulletin d’impôt) for such a year arrives. For tax purposes the duty does not end on its own when turnover falls back: the tax office decides, on a reasoned request
• Cash-basis VAT regime: available (turnover under €500k)
• LU VAT registration: normal regime recommended — lets her reclaim input VAT on LU business costs (office, software, equipment) while her output VAT stays at €0

Worked examples

Example 1 — Selling downloadable products to German consumers

Anna is a freelance designer in Luxembourg. She earns €15,000 from LU clients and €18,000 selling downloadable website templates to German consumers — an automated download, with no human intervention, so it counts as an electronically supplied service.

• Because her cross-border B2C sales exceed €10,000, the place of supply for those sales moves to Germany (article 19quater of the LU VAT law). Below €10,000, they would have stayed in Luxembourg and none of this would apply.
• EU-wide turnover: €33,000 → under €100,000 (within)
• Sales to Germany: €18,000 → under Germany’s €25,000 prior-year threshold (within)
• She opts into the EU franchise, gets an EX number, files quarterly reports.
• No German VAT charged, no German VAT registration or OSS needed. She can also use the LU €50k franchise for her LU sales.

Most freelance services never get this far. An ordinary service sold to a private individual — bespoke web design, coaching, consulting, writing — is supplied where you are established, which for you is Luxembourg, at any volume (article 17 §1 c). There is no German supply for the EU franchise to exempt, and your Luxembourg franchise already covers those sales. The €10,000 rule and the EX number enter the picture for goods sent to another country or for genuinely electronic services: automated downloads, hosting, software delivered without human intervention. Custom work you personally produce for a client is not an electronic service, even when you deliver it by email. Live online events are the exception with no threshold: a webinar or online group class sold to private participants is taxed where each of them lives, from the first euro (article 17 §2 4° b), so a German participant makes it a German supply — one the EX number can exempt.

Example 2 — E-commerce seller, growing fast

Marc sells handmade products across the EU via his online shop. Year-end turnover: Luxembourg €8,000, Germany €30,000, France €40,000, Belgium €20,000.

• EU-wide turnover: €98,000 → under €100,000 (within, just barely)
• Germany: €30,000 → over Germany’s €25,000 prior-year threshold (exceeded)
• He loses the franchise in Germany only — must register for German VAT on those sales (or use OSS). He keeps the franchise in France and Belgium (still under their thresholds).

Germany’s regime is stricter than Luxembourg’s. German Kleinunternehmer status requires both prior-year turnover of €25,000 or less and current-year turnover of €100,000 or less. Breaching the €100,000 current-year ceiling triggers immediate loss of franchise status — no tolerance margin, unlike LU’s 10%.

Example 3 — LU freelancer with 100% USA turnover

Sofia is an IT consultant in Luxembourg. Her only client is a US company. Annual revenue: €200,000.

• EU cross-border franchise: not relevant (no EU sales).
• The €200,000 is outside EU VAT scope (B2B service, place of supply = US). No LU VAT to charge; under the normal regime the €200,000 still goes in box 019 of her VAT return.
• LU accounting: must keep double-entry books (over €100k) — from the year after her first year above it or, if hers is a liberal profession, from the year after the tax assessment for that year arrives.
• LU income tax: progressive personal income tax on the €200k profit (same as any sole proprietor).
• Invoice wording: “VAT not applicable — place of supply outside EU.”
• LU CCSS: contributions still due on the full net profit.

Example 4 — Franchise vs normal: same turnover, different answer

Emma and Léa both freelance from Luxembourg. Same turnover: €35,000 from LU clients + €10,000 from German business clients = €45,000 total. Because those German clients are businesses, the place of supply is Germany (article 17 §1 b) and the client accounts for the German VAT by reverse charge, so these sales need no EX number; with one, they would be exempt in Germany instead, as the AED’s FAQ explains. Both are under the LU national franchise threshold (€50,000) and under the EU cross-border ceiling (€100,000 EU-wide, Germany’s €25,000 prior-year threshold respected). Both are eligible for both franchises.

Emma writes and translates from home. Her LU business costs are about €1,000/year (home internet, software subscriptions, a few books).

• Franchise costs her ~€170 of input VAT she would otherwise reclaim (€1,000 x 17%)
• But it saves her the standard annual VAT return and the admin of charging 17% VAT on every invoice
• Franchise wins — simpler admin, minimal input VAT given up

Léa runs a small design studio. Her LU costs are about €15,000/year — co-working fees, design software (Adobe, Figma), equipment (laptop, tablet, 5K monitor), accountant.

• Franchise would cost her ~€2,550 of unrecoverable input VAT (€15,000 x 17%) every year
• That’s real money out of her pocket
• Normal VAT registration wins — she reclaims €2,550/year of input VAT and accepts the overhead of a VAT return — one a year, since Guichet.lu on filing VAT returns sets annual returns below €112,000 of turnover

Same turnover, different answer. The deciding factor was input VAT on LU business costs, not output turnover.

Quick reference — national SME thresholds (2025/2026)

Thresholds shift frequently. Always verify the current figure on the European Commission’s SME VAT rules site before acting.

Quick reference