Updated on
February 11, 2026
7. Tax Registration and VAT Obligations
All independent professionals must register with Luxembourg tax authorities and comply with income tax and potentially VAT obligations. Understanding these requirements from the start ensures proper compliance and helps you manage tax obligations effectively.
Income Tax Registration
Register with the Administration des Contributions Directes (ACD) by contacting your local tax office (bureau RTS) once you begin your independent activity. This registration establishes your tax obligations and filing requirements based on your business structure and activity type.
As an independent professional, you pay income tax on your business profits (revenue minus deductible expenses) rather than on gross income. This fundamental difference from employee taxation allows for various business expense deductions that can significantly reduce your taxable income.
Understanding VAT Requirements
Value-added tax (VAT) registration becomes mandatory once your annual turnover reaches €35,000 for services or €25,000 for goods (these thresholds are subject to change and should be verified). Once registered, you must charge VAT on your services, submit periodic VAT returns reporting VAT collected and paid, and pay net VAT owed to tax authorities.
Standard VAT rates in Luxembourg are 17% for most services, 14% for certain goods and services, 8% for specific categories, and 3% for essential items. Understanding which rate applies to your services ensures proper invoicing and compliance.
VAT Registration Benefits and Obligations
While VAT registration creates administrative obligations, it also provides benefits. You can deduct VAT paid on business purchases and expenses from the VAT you collect from clients. For businesses with significant equipment purchases or operating expenses, this deduction can improve cash flow and reduce effective costs.
Consider registering for VAT voluntarily even below the mandatory thresholds if your business incurs significant VAT on expenses. Voluntary registration allows you to recover this VAT, potentially improving your financial position despite the additional administrative requirements.
Ongoing Tax Compliance
Independent professionals must file annual tax returns declaring business income and expenses, maintain detailed records supporting all income and deductions, submit periodic VAT returns if registered (monthly or quarterly depending on your situation), and make advance tax payments throughout the year based on estimated annual liability.