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27.4 VAT on Sales: Recording and Accounting

Understanding Output VAT​

Output VAT (TVA collectée) is the VAT you collect from customers on your sales. It represents VAT that you must remit to tax authorities (minus any input VAT you can recover).

When to Charge VAT​

You must charge VAT on sales when:

  1. VAT-Registered: You are registered for VAT
  2. Taxable Supply: You make a taxable supply of goods or services
  3. In Luxembourg: Supply is made in Luxembourg (or subject to Luxembourg VAT rules)
  4. To Customer: Supply is made to a customer (B2B or B2C)

VAT-Inclusive vs. VAT-Exclusive Pricing​

VAT-Inclusive Pricing (B2C)​

For business-to-consumer (B2C) sales, prices are typically displayed including VAT:

Example:

  • Menu price: €23.40 (VAT-inclusive)
  • VAT calculation: €23.40 ÷ 1.17 = €20.00 (excluding VAT)
  • VAT amount: €23.40 - €20.00 = €3.40 (17% VAT)

VAT-Exclusive Pricing (B2B)​

For business-to-business (B2B) sales, prices are often quoted excluding VAT:

Example:

  • Price excluding VAT: €100.00
  • VAT (17%): €17.00
  • Total including VAT: €117.00

Recording VAT on Sales​

Cash Sales​

Transaction: Sell €117 of goods for cash (€100 + €17 VAT)

PCN Accounting:

  • Debit: Account 530 (Cash) - €117.00
  • Credit: Account 701 (Sales) - €100.00
  • Credit: Account 44581 (VAT on sales) - €17.00

Credit Sales​

Transaction: Sell €234 of services on credit (€200 + €34 VAT)

PCN Accounting:

  • Debit: Account 411 (Customers) - €234.00
  • Credit: Account 706 (Services rendered) - €200.00
  • Credit: Account 44581 (VAT on sales) - €34.00

VAT Invoice Requirements​

VAT invoices must include:

  1. Invoice Number: Sequential invoice numbering
  2. Date: Invoice date
  3. Supplier Details: Your business name, address, VAT number
  4. Customer Details: Customer name and address (VAT number for B2B)
  5. Description: Description of goods/services supplied
  6. Quantity and Price: Quantity, unit price, total
  7. VAT Rate: VAT rate applied (17%, 14%, 8%, 3%)
  8. VAT Amount: VAT amount shown separately
  9. Total: Total amount including VAT

Multiple VAT Rates on One Invoice​

When selling items with different VAT rates, show each rate separately:

Example Invoice:

  • Food items (17%): €100.00 + €17.00 VAT = €117.00
  • Wine (14%): €50.00 + €7.00 VAT = €57.00
  • Water (8%): €10.00 + €0.80 VAT = €10.80
  • Total: €160.00 + €24.80 VAT = €184.80

VAT on Discounts and Returns​

Discounts​

Before Invoice:

  • Apply discount to price excluding VAT
  • Calculate VAT on discounted price

After Invoice:

  • Issue credit note for discount
  • Reduce VAT proportionally

Returns​

Transaction: Customer returns goods worth €117 (€100 + €17 VAT)

PCN Accounting:

  • Debit: Account 44581 (VAT on sales) - €17.00
  • Debit: Account 701 (Sales) - €100.00
  • Credit: Account 411 (Customers) or 530 (Cash) - €117.00

Special Situations​

Deposits and Advance Payments​

Transaction: Receive €117 deposit (€100 + €17 VAT)

PCN Accounting:

  • Debit: Account 512 (Bank) - €117.00
  • Credit: Account 419 (Advance payments) - €100.00
  • Credit: Account 44581 (VAT on sales) - €17.00

When goods delivered:

  • Transfer from advance payments to sales
  • VAT already recorded

Tips and Service Charges​

  • Tips (voluntary): No VAT on tips given directly to staff
  • Service charges (mandatory): VAT applies at standard rate (17%)

Luxembourg Compliance Note​

Important Requirements:

  • Issue invoices for all B2B sales (mandatory)
  • Issue receipts for B2C sales (recommended, required for certain amounts)
  • Retain copies of all invoices for 10 years
  • Display VAT number on all invoices
  • Separate VAT on invoices (show VAT amount separately)

Penalties:

  • Missing VAT on invoice: Penalty up to €2,500
  • Incorrect VAT calculation: Interest and penalties
  • Missing invoices: Audit complications

Think It Through​

Marie's restaurant serves a table with food (€50 at 17% VAT), wine (€30 at 14% VAT), and water (€5 at 8% VAT). How should she record this transaction? What should the invoice show?

Concepts in Practice​

Restaurant Multi-Rate Invoice

Le Petit Bistro invoice for a table:

Invoice Details:

  • Food (17%): €50.00 + €8.50 VAT = €58.50
  • Wine (14%): €30.00 + €4.20 VAT = €34.20
  • Water (8%): €5.00 + €0.40 VAT = €5.40
  • Subtotal: €85.00
  • Total VAT: €13.10
  • Total Due: €98.10

PCN Recording:

  • Debit 530 (Cash): €98.10
  • Credit 701 (Food sales): €50.00
  • Credit 701 (Wine sales): €30.00
  • Credit 701 (Water sales): €5.00
  • Credit 44581 (VAT 17%): €8.50
  • Credit 44581 (VAT 14%): €4.20
  • Credit 44581 (VAT 8%): €0.40