On 1 January 2015 new VAT rules took effect for telecommunications, broadcasting and electronic services, which will always be taxed in the country where the customer resides.
The new rules are enshrined in the 2015 VAT Directive which dictates that VAT collection on digital services will, from January 2015, be based on where the end consumer is located.
Before those rules, EU businesses providing telecommunication, broadcasting and electronically supplied services to EU final customers were obliged to charge VAT at the rate applicable in the country where the seller is established while non-EU businesses had to charge VAT at the rate imposed by the country of the final customer.
From 2015, service providers established in Luxembourg can no longer apply the low Luxembourg VAT to the services they supply to private individuals resident in another Member State. As a consequence, businesses providing such services will have to register in the Member States of their clients or apply the Mini One Stop Shop (MOSS) regime, which allows them to file only one VAT return in Luxembourg.
The government of Luxembourg has accordingly increased its key VAT rates by two per cent excluding the super reduced rate of 3%.