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12.5 Luxembourg VAT Payable Accounting (Class 4 - TVA)

VAT Payable Process​

VAT Collection:

  • Collect VAT on sales
  • Record as VAT Payable
  • Must be paid to authorities

VAT Recovery:

  • Pay VAT on purchases
  • Record as VAT Recoverable
  • Can offset against VAT Payable

Net VAT: Net VAT = VAT Payable - VAT Recoverable

VAT Return Process​

Monthly/Quarterly/Annual:

  1. Calculate VAT Payable (from sales)
  2. Calculate VAT Recoverable (from purchases)
  3. Calculate Net VAT
  4. File VAT return (eCDF)
  5. Pay net VAT

Example:

  • VAT Payable: €5,000
  • VAT Recoverable: €3,000
  • Net VAT: €2,000

Journal Entry:

430000 VAT Payable                €2,000
431000 VAT Recoverable                        €2,000
510000 Cash                                    €2,000
To record net VAT payment

VAT Rates in Luxembourg​

Standard Rates:

  • 17%: Standard rate (most goods and services)
  • 14%: Reduced rate (some goods)
  • 8%: Super-reduced rate (some goods)
  • 3%: Super-super-reduced rate (food, books, etc.)

Must Track by Rate:

  • Different rates for different items
  • Must report by rate on VAT return
  • Must maintain proper records

Luxembourg Compliance Note​

VAT Payable in Luxembourg:

  • Must be calculated accurately
  • Must be filed on time (eCDF)
  • Must be paid on time
  • Must track by rate
  • Must maintain documentation
  • Penalties for late payment

Think It Through​

Why is it important to track VAT by rate? How does this affect VAT return preparation?